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In 2025, advanced economies showed notable resilience, with global GDP expanding by 3.2%. This robust growth came despite significant policy turbulence and ongoing trade frictions, largely fueled by a surge in AI-related investments and record-breaking equity markets. However, this economic expansion has occurred against a backdrop of deepening geopolitical tensions, social divides, and escalating ecological pressures.
Ecological and social challenges
The pursuit of rapid technological advancement and economic gains has pushed humanity beyond seven of the nine recognised planetary boundaries. The intensified focus on AI and defense has driven up energy consumption, resource extraction and carbon emissions, with short-term economic growth frequently prioritised over environmental sustainability. Simultaneously, the rewards of the AI boom have been unevenly distributed, with wealthier households capturing most gains. Lower-income groups have seen limited benefits, exacerbating social inequality, political polarisation and widespread social discontent.
Financial markets and economic outlook
Despite these underlying vulnerabilities, equity markets have remained buoyant, sustained by optimism around AI and expectations of interest rate cuts by the US Federal Reserve in 2026 - even as inflationary pressures persist. Looking forward, global growth is expected to slow modestly to around 3.0% in 2026, mainly due to the negative impact of tariffs on US demand. Nevertheless, a continued surge in AI investments and increased defense spending, particularly in Europe, are anticipated to offset much of this slowdown.
As the global economy adapts to a 'new normal' characterised by chronic policy uncertainty, business and consumer confidence may gradually stabilise. While ongoing investments in AI and defense might cushion the anticipated slowdown, they also render economic expansion increasingly dependent on fragile foundations - marked by environmental stress, rising inequality and speculative financial markets. The long-term sustainability of this growth is therefore questionable.
Opportunities for change
There remains cautious optimism for the future. As the consequences of climate change, social inequality, and geopolitical instability become more apparent, there is a growing recognition among investors that enduring financial returns require a foundation of genuine stability. By channeling capital into truly sustainable and transformative initiatives, investors have the potential to support both continued innovation and the long-term health of societies and the planet. Ultimately, ensuring that humanity’s ambitious pursuit of technological and economic progress does not undermine the stability of the world itself will be crucial in the years ahead.