Against a backdrop of geopolitical upheaval and shifting economic policies, Clémentine Gallès, Chief Economist and Strategist at Société Générale Private Banking, analyzes the major macroeconomic balances of 2026 and their implications for markets and investment.
After several years dominated by monetary policy, 2026 marks the strong comeback of fiscal and industrial policies, against a backdrop of persistent geopolitical tensions and the reaffirmation of economic sovereignty.
I have three main responsibilities. The first is to define the global macroeconomic framework: this involves less producing numerical forecasts than constructing scenarios, characterizing their tone—moderate growth, slowdown, or recession—and, above all, positioning them in relation to the market consensus. This relative approach makes it possible to identify points of divergence and their potential implications for the markets.
The second task is to lead the Global Investment Committee, which regularly brings together the heads of the management companies of the various entities. Together, we translate the macroeconomic environment into concrete strategic decisions for the portfolios managed for our clients.
Finally, my third mandate is communication: internally with the teams, and externally through publications and presentations to clients, particularly at conferences.
The common thread running through our analysis for 2026 is clearly economic sovereignty. It is emerging as a response to a series of shocks—the pandemic, the war in Ukraine, trade tensions—and an increasingly fragmented geopolitical environment. Many countries are implementing or preparing stimulus and support plans for their economies, often through targeted industrial policies.
Japan and Germany are striking examples of this, with potentially very significant plans. In Germany, the change in fiscal policy is major: the public deficit is expected to rise from around €143 billion to €175 billion in 2026, as part of a plan focused on industrial sovereignty, energy transition, infrastructure, and defense. In Japan, the new support plan announced exceeds €110 billion, with an emphasis on domestic demand, private investment, and infrastructure modernization. In the United States, the dynamic is different but equally powerful, driven by a highly favorable fiscal policy that is resolutely oriented toward “America First.” In 2026, fiscal policies are expected to take over from monetary policies, which have largely supported growth since 2024 and are now expected to level off.
It is undeniable that Europe is dependent on the United States, particularly in cutting-edge technologies and artificial intelligence. But this dependence is largely reciprocal. The two regions are among the most economically interconnected in the world, both in terms of trade in goods and services.
The United States also has a significant trade deficit with Europe in goods, which partly explains its firm stance on tariffs. However, this relationship is part of a framework of close financial interdependence. Beyond trade, financial ties are essential: Europe is a major provider of global savings and one of the leading investors in US financial assets. In particular, it holds around 40% of US government bonds held by foreign investors, illustrating the central role of European savings in financing the US economy.
When we look at the eurozone as a whole, rather than just France, the budgetary situation appears more favorable than in the United States. Public debt and deficits are generally better contained, which gives Europe real budgetary capacity to finance support plans.
Furthermore, Europe has abundant private savings, both on the household and corporate sides. These savings are currently largely invested abroad. If there were strong political will to redirect them towards European projects, the financing capacity exists in both the public and private sectors.
The announcement of a massive support plan in Germany is a major step forward in this regard. Germany, the eurozone’s largest economy and particularly exposed to recent shocks, is sending a strong signal that could give new momentum to the entire European economy.
In a broadly favorable growth scenario for 2026, we are maintaining significant exposure to equity markets. Our preferences are mainly for Europe and Asia.
In Europe, we favor sectors that are directly or indirectly benefiting from stimulus plans: defense, infrastructure, and banking, which is benefiting from the current shape of the yield curve and the expected steepening of the curve. In Asia, we are positive on artificial intelligence, as we are no longer focusing solely on end demand, but on the entire production chain, particularly in Korea and China. In the United States, we have reduced our positions in AI, as valuations have become high. Asia, on the other hand, offers a different and complementary exposure to this theme, with a significant weighting of industrial and technology players.
Absolutely. The steepening of the yield curve is a major theme. Short-term rates have been lowered by central banks, while long-term rates remain high and could continue to rise, particularly due to the financing needs associated with budget plans.
In this context, we remain very cautious on government bonds, but see opportunities in carry strategies, particularly on corporate bonds, where yields remain attractive despite long-term rates likely to remain high for some time. These strategies allow investors to capture attractive yields while limiting the impact of valuation changes linked to rising rates.
