Global equities 2026 outlook: Dow Jones catch-up and Asia's bullish structures

• Global equities stayed resilient in 2025, absorbing tariff-driven trade shocks and US-China tensions, with the iShares MSCI All World Index on pace for a strong third consecutive double-digit annual gain.
• Asia and several emerging markets led performance, with South Korea, Brazil, and Hong Kong topping year-to-date returns, while the US outperformed only when measured from the April 2025 post-selloff reversal.
• Rotations and valuation resets shaped regional winners, as capital shifted out of expensive US mega-cap tech into cheaper opportunities across Europe and Asia, with Hong Kong and Japan boosted by supportive liquidity and policy tailwinds.
• Macro conditions now favour a more dovish Fed in 2026, supported by falling breakeven inflation, softer Treasury yields, and weaker oil prices, conditions that lower the risk of reigniting inflation and widen the runway for rate cuts.
• Technical setups point to potential leadership changes, with the Dow Jones Industrial Average positioned for catch-up gains amid a steeper yield curve and strengthening value factors. Meanwhile, Japan’s Nikkei 225 and Hong Kong’s Hang Seng Index remain in major bullish structures.
• China’s deflation risks are easing, as core CPI stabilises and the property downturn slows—an improving backdrop that could extend Hong Kong’s multi-month uptrend, particularly if the Hang Seng Index breaks above the long-capped 27,500 resistance.

Global stock markets have continued their bullish trajectory from 2024 so far, despite several turbulent headwinds that occurred in 2025. The most striking was the US White House administration’s global reciprocal tariffs on all US trading partners, which kick-started a global trade war.

In addition, the intensified US-China tit-for-tat incremental tariffs and sanctions manoeuvres on each country’s key products and services, such as high-end semiconductor chips to run cutting-edge Artificial Intelligence (AI) models and rare earths to produce magnets essential for the auto, electronic, and defence industries, as well as in renewable energy.

Based on the price actions of the iShares MSCI All World Index exchange-traded fund as of 1 December 2025, it is on track to end 2025 with a stellar annual gain of 20.8% with a potential third consecutive yearly gain of more than 15% after it recorded positive annual returns of 17.5% and 22.3% for 2024 and 2023, respectively.

Let’s now review the performances of several key regional and global benchmark stock indices, as well as the key drivers of their respective performances in 2025.

Global benchmark stock indices are all showing positive returns on two different reference periods: the year-to-date performance as of 28 November 2025, and from the key reversal of 7 April 2025 to 28 November 2025, where global stock markets declined by 18% on average from the 18 February 2025 high to 7 April 2025 low reinforced by the onslaught of the US White House’s reciprocal tariffs announcement on 2 April 2025.

Firstly, based on the 2025 year-to-date performance basis, the Asia Pacific and emerging markets are the top three performers: South Korea’s KOSPI (+63.6%), Brazil’s Bovespa (+32.3%), and Hong Kong’s Hang Seng Index (+28.9%), surpassing the US indices (Nasdaq 100 +21%, S&P 500 +16.5%, Dow Jones +12.2%, and Russell 2000 +12.1%) (see Fig. 1).

Secondly, considering the other reference period of 7 April 2025 to 28 November 2025, one of the benchmark US stock indices managed to be in the league of the top three outperformers: South Korea’s KOSPI (+68.7%), Japan’s Nikkei 225 (+61.4%), and the US’s Nasdaq 100 (+45.9%) (see Fig. 2).

In a nutshell, 2025 has broadly been a solid upside year for global stock markets, but the winners vary significantly, with Asia and some European markets outperforming, US indices rallying but with narrower leadership that is concentrated on the AI’s high productivity theme play.

Regional rotation and valuation appeal outside the US stock market. Earlier in 2025, investors began rotating out of stretched U.S. large-cap tech and into comparatively cheaper value opportunities across other regions. Europe, in particular, benefited as subdued valuations and renewed confidence in fiscal and defence spending drew fresh inflows.

Macro and liquidity tailwinds in Asia. In Hong Kong and Japan, improved liquidity conditions, a supportive policy environment, and regional economic recovery helped lift equity performance sharply.

Below is a summary of key performance drivers for different regional benchmark stock indices.

Next, we break down the key macro forces that are likely to shape global equity performance in 2026.

The US Federal Reserve has finally reinstated its interest rate cut cycle in September 2025, after a 9-month pause, with two interest cuts of 25 basis points each to bring the Fed funds rate to its current level of 3.75%-4% as of December 2 2025.

Based on the latest data from the CME FedWatch tool at the time of writing, the Fed funds futures market has priced in a high chance of 87% that the Fed will likely cut by another 25 bps for the third time, lowering the Fed funds rate to 3.50%-3.75%.

The macro landscape heading into 2026 is tilting toward a more accommodative Federal Reserve stance. Both the 5-year and 10-year breakeven inflation rates (a gauge of future inflationary expectations) have drifted lower to 2.29% and 2.23% from a high of 2.62% and 2.42% in February 2025. This stability stands in stark contrast to the inflation surge that peaked around May 2022, reinforcing that inflation expectations are now well-contained (see Fig. 3).

Simultaneously, the US 10-year Treasury yield has rolled over from its October 2023 highs and persistently tracked lower through 2024 and 2025. This downtrend signals a potential softer growth momentum, which no longer requires a restrictive policy stance.

Crude oil has also weakened steadily, trading closer to the mid-$50s. Historically, sustained declines in energy markets may lead to cooling headline inflation and reduced cost-push pressure. With energy no longer acting as an inflationary tailwind, the Fed’s risk of reigniting inflation by easing policy is significantly lower.

Together, these dynamics create a macro environment where maintaining restrictive policy makes little sense. The Fed has both the justification and the runway to ease more assertively in 2026 to support growth without jeopardising price stability.

A dovish Fed heading into 2026 may continue to support the ongoing major bullish trend in global stock markets.’

Let’s focus on the potential performances of several regional benchmark stock indices from a technical analysis perspective.

The Financials sector forms the largest weightage of around 27% in the Dow Jones Industrial Average, which has lagged this year’s top-performing Nasdaq 100, which is heavily weighted by the Technology sector (64%), riding on the coattails of the AI high productivity theme.

Given that the Fed may continue its interest rate cut cycle into 2026, non-technology US stocks with lower valuations and firm earnings growth trends may see a catch-up bullish play as the AI-centric rally starts to broaden out to the other sectors of the US stock market.

Also, the re-steepening of the US Treasury yield curve (10-year minus 2-year) from 0.48% on 29 October 2025 to 0.53% on 7 November 2025, which, in turn, also reinforced the bullish breakout of the ratio chart of the S&P 500 Enhanced Value ETF (35% weightage in Financials)/S&P 500 ETF (see Fig. 4).

At the same time, the ratio chart of the S&P 500 Momentum ETF (36% weightage in Information Technology)/S&P 500 ETF staged a bearish breakdown on 3 November 2025.

The current re-steepening of the US Treasury yield curve, coupled with a major bullish breakout seen on the ratio chart of S&P 500 Enhanced Value ETF (35% weightage in Financials)/S&P 500 ETF (which indicates the potential outperformance of the value factor in the US stock market) is likely to support a potential outperformance of the Dow Jones Industrial Average in 2026.

Watch the 44,975/44,260 key long-term pivotal support on the US Wall Street 30 CFD Index (a proxy of the Dow Jones Industrial Average futures) to maintain its ongoing major uptrend phase (see Fig. 5).

A clearance above the 48,460 current all-time high area, as of 12 November 2025, reinforces the potential for a bullish impulsive up move sequence, with the next major resistances expected to come in at 49,220/49,670 and 51,630.

However, failure to hold at 44,260 key pivotal support would jeopardize the major uptrend, potentially exposing a corrective decline to reveal the next major supports at 40,830 and even 36,620.

Next up, let’s decipher what is in store for the Hong Kong and Japanese stock markets in 2026

The health of the Japanese economy has continued to improve since the start of the year. Based on the latest data from the Citigroup Economic Surprise Index (ESI) as of December 1, 2025, the ESI has jumped higher to 48.10, its highest level since February 23, 2024, after a major low of -52.2 was printed on December 6, 2024 (see Fig. 6).

The Economic Surprise Index (ESI) measures how actual economic data compares with consensus expectations; readings above zero signal that the economy is outperforming forecasts.

At the same time, analyst sentiment toward Japanese corporates has strengthened. Citigroup’s Earnings Revision Index (ERI), which tracks the share of analysts raising earnings per share (EPS) forecasts minus those cutting them, has climbed to 0.36 as of 28 November 2025, up from 0.27 a week earlier, according to MacroMicro. Japan’s ERI now outpaces the US (0.28), Europe (0.04), and the UK (-0.27), highlighting that analysts are currently most optimistic about Japan’s earnings outlook (see Fig. 7).

The price actions of the Japan 225 CFD Index (a proxy of the Nikkei 225 futures) have remained in a major bullish trend since its bullish breakout from a 12-month range configuration in early August 2025 (see Fig. 8)

It printed a fresh all-time high of 52,664 on 4 November 2025 before staging a multi-week medium-term correction of 8.8% to print a low of 48,011 on 21 November 2025.

Interestingly, the correction has stalled and reversed at the 50-day moving average and the lower boundary of the ascending channel in place from the 7 April 2025 low of 30,343, indicating that the major uptrend phase remains intact.

Watch the 45,955 key long-term pivotal support on the Japan 225 CFD Index for the next major resistances to come in at 52,840/53,310 and 56,540/57,130.

On the flipside, a break and a weekly close below 45,955 negates the bullish tone, and may trigger a steeper corrective decline to expose the next major support at 42,520/41,620 (also the 200-day moving average).

China has faced the risk of a deflationary spiral from 2020 to 2024 due to the negative reverberations caused by the pandemic, the bursting of the property bubble, and “less business-friendly” policies towards the private sector, particularly the e-commerce industry.

The fear of a deflationary spiral has triggered a negative feedback loop in China and Hong Kong’s stock markets, causing a major underperformance against major developed market stock markets, in the past four years.

Interestingly, targeted accommodating policies by China’s top policy makers have started to bear fruit in the Chinese economy. The three-year decline in consumer prices in China, excluding food and energy items, has turned around. Core CPI for October 2025 increased by 1.2% y/y in October 2025, its steepest rise since February 2024, after it rose steadily from -0.1% in February 2025 (see Fig 9).

In addition, the 8-year-plus slump in China’s new home prices across 70 cities has slowed down significantly; it dropped by 2.2% y/y in October 2025, the same pace as September 2025, while remaining at the slowest decline since March 2024.

The crux of the deflationary risk in China lies in the state of the property market via the wealth effect, where properties form a significant allocation of Chinese citizens’ retirement portfolios at around 70%.

Hence, a further turnaround in property prices is likely to improve consumer sentiment, in turn creating an uptick in domestic demand, which eventually sees a further rise in core CPI.

Therefore, an improving macro environment in China may lead to a continuation of the major bullish trend seen on the Hong Kong stock market that kick-started in January 2024.

The multi-month rally seen in the Hong Kong 33 CFD Index (a proxy of the Hang Seng Index futures) has printed a current year-to-date high of 27,401 on 29 September 2025, just a whisker below its major resistance of 27,500, a long-term secular descending trendline that has capped prior bullish moves in check since the current all-time high of 33,495 on 29 January 2018 (see Fig. 10).

A clearance with a weekly close above 27,500 triggers a potential major bullish breakout scenario for the next major resistances to come in at 29,420 and 31,120.

On the other hand, failure to hold at the 22,670 key long-term pivotal support may see a deeper corrective decline to expose the next support zone of 19,700/19,030.