Aberdeen backs global growth despite rising inflation

Aberdeen investments expects the global economy to remain resilient through the second half of 2026, supported by artificial intelligence (AI) driven investment, strong corporate earnings and steady consumer demand.

Despite tailwinds, Aberdeen warned investors face a more complex environment marked by persistent inflation and heightened geopolitical risks.

In its Q3 House View, the asset manager forecasts global growth of around 3.2% this year, remaining above trend despite a recent energy shock which kept inflation elevated and complicated the outlook for central banks.

Aberdeen Investments chief investments officer Peter Branner said the investment backdrop remained supportive for risk assets, although investors should remain mindful of mounting late cycle risks.

"The global economy continues to show resilience, supported by strong corporate earnings and the ongoing AI investment cycle. However, we are clearly in a more complex phase of the cycle, where geopolitical risks remain elevated and inflation shocks are more frequent," Branner said.

"Our base case scenario assumes a stabilisation in oil markets and continued economic expansion, but tail risks remain material. Investors should therefore remain constructive on risk assets, while maintaining diversification and resilience in portfolios."

Aberdeen expects central banks to easy policy more gradually than markets anticipate. It forecasts the US Federal Reserve will remain on hold for the rest of 2026 before resuming rate cuts in 2027, while the European Central Bank and Bank of England are also expected to pause. The bank of Japan is tipped to continue gradually lifting interest rates.

Aberdeen chief economist Paul Diggle said recurring supply side disruptions had fundamentally altered the inflation outlook.

"The global economy has entered a regime of higher inflation volatility, driven in part by geopolitics and disruptions to supply chains. While the energy shock is proving temporary, future supply-side shocks may become more frequent," Diggle said.

"This raises the probability of environments where equities and bonds move together, reinforcing the importance of diversification across other asset classes and regions."

Aberdeen remains constructive in emerging market qualities and bonds, citing continued AI-driven capital expenditure across Asia, while maintaining a positive outlook for infrastructure and global direct real estate. It retained a neutral view on private credit, warning late cycle pressures are beginning to emerge in parts of the direct lending market through weaker underwriting standards and liquidity concerns.