Maarten Ackerman, Citadel Chief Economist

Global markets are entering one of their most politically charged and economically fragile years since the pandemic, as deepening trade fragmentation, mounting sovereign debt and pressure on central bank independence collide with an artificial intelligence (AI)-fuelled productivity boom and risks, according to Citadel Chief Economist, Maarten Ackerman.

With United States (US) President Donald Trump remaking the world order, 2026 is shaping up as a year where geopolitics – rather than economic fundamentals alone – will drive market volatility, capital flows and investor confidence, including in emerging markets such as South Africa (SA), according to Ackerman’s first quarter economic outlook.

“We are no longer operating in a single globalised economy,” says Ackerman. “Economic fragmentation has become structural. Countries are reshaping supply chains, prioritising regional trade partners and reassessing strategic resources and that transition will define markets in 2026.”

Trump 2.0, trade wars and a fragile global order

President Trump’s renewed “America First” agenda is expected to keep tariffs elevated and trade tensions high in 2026, reinforcing the global shift away from integrated supply chains. This fragmentation, accelerated by the pandemic and the Russia-Ukraine war, now risks becoming entrenched.

“Tariffs don’t just distort trade flows – they create uncertainty that discourages long-term investment,” Ackerman says. “As long as protectionism remains a policy tool, the risk of escalation into broader trade wars remains real.”

At the same time, geopolitical power is becoming increasingly multi-polar, with rival blocs such as the G7 and BRICS competing for influence, resources and capital. Europe is also pushing for greater strategic autonomy through initiatives such as the new Europe Weimar Plus (Weimar+) grouping, to boost European strategic autonomy in light of growing unease about US policy unpredictability.

AI boom cushions global slowdown

Despite political risks, Ackerman says global growth is unlikely to collapse in 2026, largely because of the continued expansion of artificial intelligence and related capital expenditure.

The AI investment cycle, which gathered pace in 2025, has driven productivity gains, particularly in the US and helped absorb shocks from higher tariffs and geopolitical uncertainty. It has given the US a significant productivity edge over Europe, which lags behind in AI investments.

“AI has become the single biggest shock absorber in the global economy,” says Ackerman. “It is underpinning corporate profits, productivity and capital expenditure in a way that most other regions simply cannot replicate at this stage.”

Citadel expects global economic growth of around 2.5% in 2026, slightly below 2025 levels and well under the long-term average, but sufficient to navigate the current transition period.

US resilience, but risks mounting

The US economy remains more resilient than expected, supported by technology-led investment rather than consumer spending alone. However, risks are rising as inflation remains sticky, the labour market softens and political pressure on the US Federal Reserve (Fed) intensifies.

With Federal Reserve Chair Jerome Powell’s term ending in May 2026 and Trump aiming to install a new hand-picked chair, markets are increasingly concerned. “Any perception of political interference in monetary policy could trigger sharp global moves in currencies, bonds and equities.”

Compounding these concerns is the US’s deteriorating fiscal position. Rising borrowing, tax cuts and limited progress on expenditure reform are pushing debt sustainability higher up the global risk agenda.

Europe and China face structural headwinds

Europe’s modest rebound in 2025 was largely driven by defence-related fiscal spending, which Ackerman cautions is not a sustainable growth engine. Ageing populations, weak productivity, high energy costs and lagging AI investment are expected to cap European growth at around 1.5%.

China, meanwhile, continues to battle deflationary pressures, an ageing population and weak consumer confidence from urban Chinese who have their wealth tied up in two or more properties - as a buffer against government over-regulation of the private sector and equities – while the market is slumping. “When people feel less wealthy, it puts pressure on consumer confidence and spending. To counter this, the Chinese government is trying to stimulate the economy to make it more self-sufficient.”

“Additionally, China is producing more than it can absorb domestically and it no longer exports the bulk of its products to the US,” says Ackerman. “Until consumer confidence recovers, growth will remain structurally lower, even with ongoing policy support. We expect China’s growth to level out at about 4%, which is still reasonable given the state of affairs.”

South Africa: A pivotal year

For SA, 2026 could prove decisive. The Government of National Unity (GNU) has brought relative political stability, while improved energy security and private-sector participation are starting to ease long-standing constraints.

“There are genuine green shoots,” Ackerman says. “The turnaround in electricity supply shows what is possible when policy certainty and private capital align.”

However, he cautions that recent gains were partly supported by favourable global conditions, including a commodity upswing.

“This is a make-or-break year,” he says. “If reform stalls or political instability returns, SA risks slipping back into sub-1.5% growth. If momentum holds, we can start rebuilding capacity and investor confidence.”

Citadel remains cautiously optimistic that SA can edge closer to 2% growth over the next three years, provided investment conditions improve and infrastructure bottlenecks are eased.

Navigating a volatile year ahead

Ackerman says investors should expect heightened volatility in 2026 as markets respond to political developments, policy shifts and structural realignments.

“Periods of uncertainty are when discipline matters most,” he says. “Valuations, diversification and a long-term financial plan are essential in a world where shocks are becoming more frequent and less predictable.”