Global markets are entering a transformative phase where geopolitical factors, rather than technology trends, are expected to dominate investment decisions in 2026, according to market analyst Geoff Dennis in his recent discussion with ET Now. This represents a significant shift from 2025, which was largely defined by artificial intelligence-driven trading patterns.

Geopolitical Risks Take Center Stage

Dennis identifies 2026 as a year shaped by geopolitical developments, with multiple global flashpoints creating an complex investment landscape. Key risk factors include potential escalation involving Iran, rising China-Taiwan tensions, uncertainty surrounding US actions in Latin America, and the continuing Russia-Ukraine conflict. Despite this extensive list of geopolitical concerns, financial markets have maintained relative stability without experiencing panic-driven sell-offs.

Oil markets have responded to these tensions, with prices firming primarily due to concerns about Iran's oil exports and recognition that reviving Venezuelan supply will require substantial time and capital investment. However, risk assets have not exhibited the dramatic volatility typically associated with such geopolitical uncertainty.

Emerging Markets Defy Traditional Patterns

A particularly noteworthy development is the resilience demonstrated by emerging markets, which are defying conventional market relationships. Dennis highlights an unusual divergence where emerging market equities have gained nearly 5% year-to-date despite the US dollar index rising approximately 1%. This performance contradicts the traditional inverse relationship between dollar strength and emerging market returns.

This resilience stems from sustained capital inflows into emerging markets that began in late 2025 and have continued into 2026. Dennis characterizes emerging markets as "the flavour of the year," suggesting this momentum could persist for an extended period.

Federal Reserve Policy Outlook

Regarding US monetary policy, Dennis anticipates a cautious approach from the Federal Reserve throughout 2026. Despite recent inflation readings coming in slightly below expectations, persistent wage pressures and inflation levels above the Fed's target are expected to limit aggressive policy easing.

Dennis emphasizes that the Federal Reserve will prioritize maintaining credibility and independence amid political pressures and high fiscal deficits. He warns that excessive rate cuts could revive bond market stress if investors lose confidence in the Fed's commitment to inflation control.

Japan's Role in Global Capital Flows

Japan emerges as another critical factor influencing global capital markets flows. Expectations of fiscal expansion, regional geopolitical tensions, and political uncertainty surrounding elections have contributed to yen weakness. Dennis explains that a softer yen provides support for Japanese equities, enabling local markets to rally despite broader global uncertainties.

Market Outlook and Investment Strategy

Dennis maintains that the US economy remains fundamentally stable in 2026, providing the Federal Reserve with flexibility to implement modest easing measures while global investors continue finding value in emerging markets. Although geopolitical risks are escalating, markets appear willing to look beyond immediate concerns, creating selective opportunities rather than broad-based fear.

The analyst's assessment suggests that 2026 will be characterized by careful navigation of geopolitical developments rather than technology-driven momentum, with emerging markets potentially offering attractive investment opportunities despite traditional headwinds from dollar strength.

Global capital is beginning to rotate from the United States towards precious metals such as gold and silver, non-US equity markets and India, as weakening dollar dominance and rising fiscal stress in developed economies reshape investor allocation, according to Pankaj Tibrewal, Founder and CIO of IKIGAI.

In IKIGAI's latest quarterly newsletter, Tibrewal characterizes 2025 as an unusually unpredictable year for global capital markets . He notes that the structure of global trade and capital flows is fundamentally changing, with the era of smooth globalisation fading as trade becomes more regional and political considerations play larger roles in economic decision-making.

US Dollar Dominance Weakening

One significant consequence of this shift has been the gradual erosion of US dollar dominance in global markets. Tibrewal highlights that the United States' share of global trade has declined substantially from around one-third in 2000 to roughly one-quarter today. Simultaneously, the dollar's share of global foreign-exchange reserves has fallen from 72% to 58% over the same period.

Fiscal pressures in the US have intensified significantly, with government debt approaching $40.00 trillion and annual interest costs nearing $1.00 trillion. The newsletter emphasizes that economic growth in the US is increasingly dependent on borrowing and continued capital inflows from international sources.

Non-US Markets Outperform

Despite US fiscal challenges, American equity markets remained resilient through much of 2025. The S&P 500 recorded 38 all-time highs during the year, pushing total US public equity market capitalisation to approximately $72.00 trillion. However, non-US equity markets and commodities significantly outperformed American equities in 2025.

Tibrewal suggests this imbalance between market representation and economic output presents a key consideration for long-term investors, questioning whether future capital allocation could increasingly favour international and emerging markets.

Precious Metals Surge

Gold and silver delivered exceptional performance during 2025, with gold rising approximately 67% and silver gaining nearly 147% in dollar terms, marking silver's strongest annual performance since 2007. Tibrewal attributes this surge to concerns around currency stability, government debt levels, and broader financial risk rather than random market movements.

Central banks played a crucial role in this trend, purchasing an average of approximately 66.00 tonnes of gold per month over the past year. This represents nearly four times the pace seen prior to 2022, reflecting efforts to diversify reserves and reduce dependence on any single currency.

India's Strategic Position

Tibrewal notes that India's macroeconomic position stands out favorably in the current global rebalancing. India began FY26 with strong momentum, recording GDP growth of 8.20% in the second quarter, supported by services, manufacturing, and public investment.

A healthy monsoon, rising rural wages, and GST cuts amounting to nearly ₹2.00 trillion supported domestic demand. The Reserve Bank of India reduced policy rates by 125 basis points and injected ₹11.00 lakh crore of liquidity into the financial system. India's external position remains relatively stable, with the current account deficit expected to stay below 1% of GDP, remittances reaching $136.00 billion, and gross foreign direct investment projected to approach $100.00 billion.

Commodities and Geopolitical Factors

Tibrewal observes early signs of a broader recovery in the commodities cycle following years of underperformance. This shift connects not only to economic demand but also to geopolitical considerations, particularly China's dominance in refining critical materials such as lithium, copper, and aluminum. These materials serve as key inputs for electric vehicles, data centres, and power infrastructure, increasing the strategic importance of commodities in global supply chains.

While risks remain, including fiscal constraints, global tariff uncertainty, and weak formal job creation, Tibrewal argues that the broader shift in global capital allocation could work in India's favour as investors increasingly prioritise balance-sheet strength and macroeconomic stability in their investment decisions.