The main economic risk lies in a potential slowdown of the US economy. So far, the trade war’s negative effects have been limited. Growth remains solid, and inflation has only edged up despite higher import tariffs. Still, these effects could eventually surface, slowing growth and/or pushing inflation higher.
US companies are becoming more cautious about hiring. Job creation has fallen sharply in recent months, and for the first time since 2021, vacancies are fewer than job seekers. Lay-offs remain modest: unemployment has only ticked up slightly. A weaker labour market could dent consumer confidence, which is already fragile. According to the University of Michigan’s monthly survey, confidence is at its lowest in three years. For now, spending remains resilient despite this weakness.
Beneath the surface, however, vulnerability is growing: wealthier Americans are keeping the economy afloat. Lower- and middle-income households are under increasing pressure. Bloomberg reports that the top 10% of households account for nearly half of all spending. This group benefits from rising share prices and property values, while others struggle with high living costs and mounting debt. This divide between ‘haves’ and ‘have-nots’ is not new, but financial stress is spreading from the lowest incomes to the middle class – making the economy more exposed to a downturn.
We expect only a mild slowdown in 2026. Spending could be supported by tax cuts (Trump’s One Big Beautiful Bill) and lower interest rates as the central bank continues to ease policy. Ongoing investment in AI will also underpin growth. Read our full economic outlook here.
"}},{"componentType":"sectionTitle","title":"The Dollar’s Depreciation"},{"componentType":"paragraph","richBody":{"value":"One of this year’s most striking market developments has been the weakening of the US dollar. In the first half of the year, the dollar lost about 15% against the euro. The main trigger was President Trump’s protectionist stance, culminating in hefty import tariffs announced on 2 April. For a time, investors stopped viewing the dollar as a ‘safe haven’. Trump’s tax plans, which will further inflate the national debt, and his interference with central bank policy also weighed on the currency. Since then, calm has returned, and the euro-dollar exchange rate has hovered around 1.16 for several months. This resilience reflects the US economy’s strength, aided by the competitive edge exporters gain from a weaker dollar.
For euro-based investors like us, the dollar matters: a weaker dollar reduces returns when converted into euros, as seen this year. Exchange rates, however, are influenced by many factors and remain hard to predict. For our currency outlook, we rely on ING Research, which expects the euro-dollar rate to rise towards 1.20 in 2026, partly because the US central bank is likely to cut rates further. Lower interest rates make the dollar less attractive. On the other hand, they support the US economy, keeping the dollar appealing to investors.
"}},{"componentType":"sectionTitle","title":"Public Finances Under Pressure"},{"componentType":"paragraph","richBody":{"value":"It’s not just US government debt that is rising; many countries face similar challenges. France has struggled to reduce its deficit, while Germany plans a major stimulus package to revive its sluggish economy. NATO countries have also committed to significantly higher defence spending. This pressure on public finances has pushed long-term interest rates higher: investors demand greater compensation for lending to governments over extended periods. Yields on 10-year and longer-dated bonds are gradually increasing. This is not only unfavourable for bond investors but also weighs on equity valuations. You can read our fixed income outlook here.
"}},{"componentType":"sectionTitle","title":"Is There an AI Bubble?"},{"componentType":"paragraph","richBody":{"value":"Finally, a risk dominating the headlines: concerns that the AI boom may, in fact, be a bubble. Despite strong quarterly results, doubts have emerged about whether the elevated valuations of many AI-related stocks are sustainable. The term ‘AI bubble’ is everywhere, and if enough people repeat it, it can become a self-fulfilling prophecy: AI share prices did dip briefly in November.
We do not believe we are in an AI bubble – and even if one exists, we are far from the point where it would burst. Valuations have risen sharply, but so has earnings growth. As long as earnings keep pace, there is little cause for concern. Moreover, valuations of leading AI stocks (such as Nvidia, Microsoft, Alphabet, Amazon and Meta) remain well below those seen during the late-1990s internet bubble.
There are questions about whether billions invested in data centres will ever be recouped. That is uncertain, but the largest investors – the companies above – are highly profitable and have strong balance sheets. They fund most AI spending from operating cash flows. Debt is also being raised, but given their credit strength, this poses no immediate risk. Despite the uncertainties, we remain comfortable with our overweight position in technology. These investments are strategic, and AI’s potential productivity gains are significant. For these companies, the risk of not investing is greater than the risk of investing. Read our view on AI here.
"}},{"componentType":"linkList","iconTitle":{"title":"Read more"},"textLinks":[{"url":"/en/personal/investing/market-news-and-views/investment-outlook-2026-home","text":"Investment outlook 2026: Homepage"},{"url":"/en/personal/investing/market-news-and-views/investment-outlook-2026-opportunities","text":"Investment outlook 2026: Opportunities"},{"url":"/en/personal/investing/market-news-and-views/investment-outlook-2026-equities","text":"Investment outlook 2026: Equities"},{"url":"https://assets.ing.com/m/7dfc82cb56e72468/original/Investment-Outlook-2026.pdf","text":"Investment Outlook 2026: Download PDF"}]},{"componentType":"sectionTitle","title":"Good to know"},{"componentType":"paragraph","richBody":{"value":"Investing involves risks and costs. The value of your investment may fluctuate. Past performance is no guarantee of future results. Read more about the risks of investing .
This publication has been prepared on behalf of ING Bank N.V. and is intended for information purposes only. ING Bank N.V. obtains its information from sources deemed reliable and has taken the utmost care to ensure that the information on which it based its views in this publication was not incorrect or misleading at the time of publication. ING Bank N.V. does not guarantee that the information it uses is accurate or complete. The information contained in this publication may be changed without any form of announcement. Copyright and data file protection rights apply to this publication. Data from this publication may be reproduced provided that the source is stated. ING Bank N.V. has its registered office in Amsterdam, commercial register no. 33031431, and is regulated by the Dutch central bank De Nederlandsche Bank (DNB) and the Netherlands Authority for the Financial Markets (AFM). ING Bank N.V. is part of ING Groep N.V.
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