Bloomberg Surveillance: US Trade, 2026 Market Forecasts, and AI Investment

US Trade Policy and Global Relations

• 🇺🇸 The US trade policy has shifted in 2025 towards a fair and balanced approach, moving away from purely liberal trade.
• 📈 Tariffs have been a key tool, with expectations to finalize trade deals and maintain existing tariffs, though a Supreme Court overturn could be disastrous.
• 🍎 While cost of living is a concern, the administration argues that tariffs are about job creation, not price increases, with other policies addressing affordability.
• 🇨🇳 The US and China are working towards a more balanced trade relationship, with a potential agreement on trade volumes and types of goods in the first half of 2026, described as a form of managed trade.
• 🇪🇺 The US expresses strong concerns about discriminatory regulations imposed by the European Union on American tech companies, viewing them as protectionist measures.
• 🇮🇳 Negotiations with India are ongoing, highlighting challenges with non-tariff barriers and regulations that exclude US agriculture and industrial exports.

2026 Equity Market Outlook

• 📈 A bullish forecast for equities in 2026 is presented, with expectations of strong EPS growth and improving liquidity due to the Federal Reserve's balance sheet expansion.
• 💡 The market anticipates a return of speculation, particularly in AI-related stocks, as liquidity conditions improve.
• ⚠️ Inflation is seen as a higher probability than recession for 2026, though neither is a major concern due to potential AI-driven disinflationary pressures and fiscal stimulus.
• 💹 Rising interest rates above 4.5% could threaten the reflation cycle, with rates near 5% being bearish for equities.
• 🚀 The AI trade is expected to continue, with potential for speculation and even bubble-like valuations in later-stage venture capital, but infrastructure and companies with proprietary data are seen as key winners.

Ukraine Financing and EU Policy

• 🇪🇺 The EU has agreed on a 90 billion euro loan package for Ukraine through collective borrowing, a step towards mutualized debt.
• 🇷🇺 The failure to utilize frozen Russian sovereign assets for Ukraine's financing is noted as a political setback.
• ⚖️ Concerns about legal retribution and popular support influenced decisions regarding the use of Russian assets, particularly in Belgium.
• 💰 The collective borrowing will place a burden on highly indebted EU nations, highlighting an missed opportunity to use Russian funds.

AI Adoption and Investment Strategy

• 💡 AI adoption is growing, with 55% of the US adult population using AI, up from 45% at the start of the year.
• 📊 Measurable productivity gains averaging 2% year-over-year are attributed to AI, a significant increase compared to the post-financial crisis decade.
• 💰 Cloud revenues and LLM revenues are surging, indicating continued monetization potential for AI.
• ⚠️ While AI is not considered a bubble, bubble-like valuations exist in certain segments, particularly late-stage venture capital.
• ⚡ Companies with proprietary data, vertical expertise, and the ability to embed AI are identified as key winners, alongside infrastructure providers focused on energy bottlenecks.
• 🏦 Investors are advised to scrutinize companies taking on significant debt without commensurate revenue growth, though hyperscalers generally have strong free cash flow.