Investors are pricing in a global growth revival for 2026
High-beta stocks are outperforming, cyclicals are beating defensives, and long-term bond yields are rising.
There’s a theme to the bounce-back that has the S&P 500 knocking on the door of a fresh record high to shake off its November doldrums: a bet on the revival of global growth heading into 2026.
Traders are embracing the stocks that tend to move more than the overall market and eschewing safer alternatives.
The Invesco S&P 500 High Beta ETF has outperformed the Invesco S&P 500 Low Volatility ETF for 13 consecutive sessions, a record relative winning streak.
Similarly, a Goldman Sachs basket that tracks the performance of cyclical stocks (ex commodities) versus defensives has gone up for 13 consecutive sessions as well, extending the record streak that surpassed 2017’s run in the green.
Back in 2017, “synchronized global growth” was the macroeconomic narrative of the year.
On Wednesday, the SPDR S&P Regional Banking ETF jumped 3.5%, its biggest one-day gain since August, propelling the group to a 52-week closing high. The SPDR S&P Retail ETF, an equally weighted basket of consumer-oriented names, jumped 1.4% to the cusp of a 52-week high.
“Given strong domestic demand trends and a lack of household and corporate financial vulnerabilities, combined with fading tariff impacts and fiscal stimulus, 2026 outlooks remain somewhat too pessimistic,” wrote Peter Williams, an economist at 22V Research. “Recent bank, card, and consumer names continue to support this view.”
The Federal Reserve implicitly endorsed this pro-growth stance through its Summary of Economic Projections released in tandem with Wednesday’s rate cut, upgrading its forecast for GDP growth in 2026 to 2.3% from 1.8% in its September estimates.
During the press conference, Fed Chair Jerome Powell attributed the central bank’s improved growth outlook to resilient consumer spending, continued AI data center capex, and supportive fiscal policy.
Many developed market central banks, including Canada, the Eurozone, Sweden, Denmark, Australia, New Zealand, and Japan, are priced to have policy rates higher in one year’s time than they are now. This is not something that happens in a world where investors are preoccupied with downside risks to growth and inflation. Since late October, long-term bond yields have been rising all over the world, another signal of confidence in the outlook for nominal activity (and also reflecting large budget deficits that put a floor under growth).
Add it up and you have the bond and stock markets shaking their Magic 8 Balls to wonder about the year ahead and seeing the same answer:
“Outlook good.”
