Global Economic Outlook

13 January, 2026

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A new year may prompt investors to rationalise the intersection of major secular themes with near-term cyclical developments. Our economic outlook provides regional context to key secular themes as well as their impact on our global scenarios for the coming 12 months.

Key Themes

Our Outlook assesses the impact of key themes across global economies and markets.

The Era of Fiscal Dominance
(and the End of Central Bank Innocence)

Geopolitical rivalry is expensive. Record defense budgets, expanding industrial policy, and rising populism will compel major economies to run historically high deficits. Accompanying demands for low monetary policy rates erodes central banks’ inflation-fighting credibility. Repriced term premia will increasingly determine the level of long-term rates.

Carry On: Lean Into Structural Growth

Steeper yield curves, stretched market valuations, and economies reconfigured for structural growth warrant diversified portfolios constructed for carry and income.

Productivity Boost Redux

The $7 trillion global AI-buildout threatens near-term over-investment risks. Yet, historical precedent suggests it will ultimately seed a productivity boost that determines growth trajectories, debt dynamics, and the future winners and losers across global industries and corporations.

The Convergence of Public and Private Markets

As the delineation between public and private markets fades, expanding sources of capital can support borrowers’ credit profiles. As risk and return profiles converge, investors will benefit from assessing relative value across the public and private credit continuum.

References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities. The securities referenced may or may not be held in the portfolio at the time of publication and, if such securities are held, no representation is being made that such securities will continue to be held.

 

The views expressed herein are those of PGIM investment professionals at the time the comments were made, may not be reflective of their current opinions, and are subject to change without notice. Neither the information contained herein nor any opinion expressed shall be construed to constitute investment advice or an offer to sell or a solicitation to buy any securities mentioned herein. Neither PFI, its affiliates, nor their licensed sales professionals render tax or legal advice. Clients should consult with their attorney, accountant, and/or tax professional for advice concerning their particular situation. Certain information in this commentary has been obtained from sources believed to be reliable as of the date presented; however, we cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. The information contained herein is current as of the date of issuance (or such earlier date as referenced herein) and is subject to change without notice. The manager has no obligation to update any or all such information; nor do we make any express or implied warranties or representations as to the completeness or accuracy.

 

Any projections or forecasts presented herein are subject to change without notice. Actual data will vary and may not be reflected here. Projections and forecasts are subject to high levels of uncertainty. Accordingly, any projections or forecasts should be viewed as merely representative of a broad range of possible outcomes. Projections or forecasts are estimated based on assumptions, subject to significant revision, and may change materially as economic and market conditions change.


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