Last year, our Are You Ready for 2026? report offered a global economic outlook shaped by trends such as declining inflation and rising tariffs. We got some trends right, but other events — such as the war in Iran and an AI investment boom — shook up markets in ways few forecasters anticipated.
So now, nine months into the year, how did we do? Let’s look back at what happened, and ahead to what businesses can expect next year.
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What we predicted for 2026
Our 2026 forecast expected global growth to slow down to 2.4%, which would have made 2025–2026 the weakest two-year stretch since 2009, excluding the pandemic. Tariffs were the primary drivers of this forecast. With the weighted average of announced US tariffs above 18%, we projected global trade would contract by 3% between Q2 2025 and Q1 2026.
On inflation, we were slightly more optimistic. We expected rising oil supply and subdued demand to keep energy relatively cheap, bringing inflation down and giving central banks room to keep cutting rates.
Where our global economic outlook got it right
We argued that geopolitical shocks were becoming more frequent and that markets were, overall, too complacent about them. While we didn’t predict the war in Iran specifically, we did argue that geopolitics would become a more significant driver of asset prices and market volatility — a call that proved correct.
We also expected long-term bond yields to stay elevated even as central banks eased, due to expansionary fiscal policy and persistent risk premiums. Long-term government bond yields across many advanced economies are now at multi-decade highs.
Finally, we said the era of exceptionally low and stable inflation was unlikely to return, owing to supply shocks from geopolitics and the climate. The 2026 energy shock is consistent with this type of supply shock.
| Topic | What we said | What happened | Verdict |
| Geopolitical risk | Would become more frequent | Iran war, Hormuz closure | We identified the right trend, but missed the potential scale of an energy-related shock |
| New drivers of FX | Old macro relationships are breaking down, while policy credibility, fiscal concerns, and geopolitical fragmentation are driving FX markets | The traditional “higher rates = stronger currency” framework broke down; geopolitics and fiscal concerns now play a bigger role | We were right |
| Fed independence | One of the major risks likely to dominate markets | The markets were more focused on growth, fiscal policy, tariff implementation, and AI-driven productivity | We overstated the importance for markets |
| Tariffs | Would slow trade and growth sharply | Businesses adapted quickly, and trade routes rerouted through third countries | We were on track, but overestimated the economic damage from tariffs |
| AI | Not a major theme | $1 trillion in investment | We missed this theme |
Where the year surprised us: AI, wars, and tariffs
Energy was the biggest surprise to Convera’s team. Instead of cheaper oil, the US-Iran-Israel conflict led to the closure of the Strait of Hormuz, a chokepoint for roughly one-fifth of global oil and liquefied natural gas trade. By March, Brent was near seven-month highs. Disinflation stalled, and for the first time since late 2023, more central banks were raising rates than cutting them. We had flagged geopolitical supply shocks as an inflation risk, but didn’t call out the Middle East or give it the weight to change our base case.
AI featured little in last year’s report. In 2026, though, AI-led investment was expected to pass $1 trillion and became one of the year’s biggest macro themes. Global growth broadly followed the path we expected, but AI’s massive impact far exceeded what we anticipated. In our Are You Ready for 2027? report, we will explore AI’s role in FX markets in depth.
We also overestimated the effects of the trade war. Businesses found ways to reroute supply chains faster than expected, and fiscal support in major economies softened the blow. A US Supreme Court ruling that invalidated broad tariff authority added fresh trade policy uncertainty, but companies increasingly priced in tariffs as a cost to manage.
Central bank independence held amid tests
Last year we flagged US Federal Reserve independence as one of the biggest risks for 2026, and it surfaced sooner than many expected. In January, Kevin Warsh was nominated as Fed chair, and markets weighed his hawkish record against his recent calls for “regime change” at the Fed. By March, political pressure on the Fed, along with possible leadership changes at the ECB and Bank of Japan, had become a real-time source of macro volatility. By April, as Powell held his last press conference as chair, Senate politics around the nomination had left the leadership transition unresolved, and markets were asking whether he would stay on until a successor was confirmed.
Through it all, Fed monetary policy tracked the energy shock and inflation. 2026 proved to be a serious test, though, and the concern hasn’t gone away. Our 2027 report argues that heavy government borrowing and policy uncertainty are changing how investors price US assets. Confidence in central bank independence is part of that calculation.
Why 2027 means more uncertainty for businesses
If 2026 taught us anything, it’s that the global economy is becoming more resilient and more fragile at the same time. For 2027, we predict modest growth and easing inflation. However, the range of possible outcomes around that base case is unusually wide.
The Are You Ready for 2027? report traces much of that uncertainty to competition for capital. Governments, AI developers, and strategic industries are all competing for the same pool of global savings — and borrowing costs are rising as a result. US federal debt has passed $40 trillion, and interest payments now absorb close to one-fifth of tax revenue. The report looks at the shift through three key themes.
AI and the cost of capital
The AI buildout runs into the trillions this decade and competes directly with government borrowing for investor capital. In turn, that keeps upward pressure on long-term funding costs.
Policy risks and the TACO trade
Markets learned to bet that aggressive policy threats would be walked back, a pattern dubbed the TACO trade (“Trump Always Chickens Out”). Businesses planning months ahead can’t make that same bet, and foreign exchange risk often arrives before a policy is settled.
Chokepoints and global supply chains
The Hormuz closure illustrated how one narrow trade route can move energy prices and exchange rates. Other key routes could have a similar impact amid uncertainty. The Malacca and Taiwan Straits, for example, carry nearly a quarter of global trade, and Taiwan holds roughly 60% of the world’s advanced chipmaking capacity.
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