AllianzGI says global economy continues to absorb shocks

Allianz Global Investors’ Q3 2026 House View highlights a global economy that is bending under successive shocks, but not breaking, even as volatility remains elevated. While geopolitical tensions and persistent inflation continue to cloud the outlook, markets are increasingly characterised by divergence across regions, asset classes and scenarios, reinforcing the importance of selectivity.

In the US, technology and artificial intelligence (AI)-related investment continues to propel growth, with the contribution from information processing equipment and software investment, surpassing the peak of the dot-com bubble in late 2000. Against this backdrop, we do not expect incoming Fed Chairman Kevin Warsh to push for immediate rate cuts given the resilience in growth. A sustained drop in energy prices could eventually reopen the door to rate cuts, but inflation remains high enough to keep the Fed cautious.

Against this backdrop, below are the key takeaways most relevant for Asia and beyond:

Asia: Positioned to benefit from global structural themes

Taiwan and South Korea are benefiting from strong demand linked to the US’s AI investment cycle. China’s growth is expected to moderate after earlier fiscal support, though early signs of a reflationary trend in China could make the renminbi one of the best diversifiers. Japan continues to benefit from fiscal stimulus, and we expect the Bank of Japan to stay on a gradual normalisation path, with 50 bps of hikes in 2026.

AI as a defining investment driver across Asia

In Asia, equities are well-positioned to benefit from global themes, particularly infrastructure, defence, and AI spending. China stands out given the rapid diffusion of AI across its economy. A broad ecosystem is emerging, spanning hardware, software and infrastructure, supported by strong domestic supply chains and deep STEM talent.

Selective opportunities emerging amid volatility

Recent geopolitical tensions and inflation concerns have triggered a reset in valuations, bringing around a third of assets globally closer to fair value. In this environment, beta alone is unlikely to be sufficient. Returns will depend on careful choices across countries, sectors and instruments, and the ability to adapt.

Beyond Asia: EM, commodities and private markets

Emerging markets offer opportunities but require differentiation, including sensitivity to commodity dynamics and global demand. In commodities, we are constructive on gold in an environment where questions about central bank independence and the US dollar may return to the fore. We continue to be long commodities as a key diversifier, with our preference for gold balanced by a more neutral stance on gas, oil, copper and silver. Private markets are well-positioned to deliver attractive risk-adjusted returns, supported by higher base rates, tighter bank regulation and wider spreads, which continue to create opportunities relative to public markets.

Re-disseminated by Wealth and Society