Chief Economist's Corner: Welcome to 2026

2025 proved to be both a hectic and pivotal year. Donald Trump's America First policy and especially the trade war against the rest of the world has largely set the agenda, but the AI boom, geopolitical tensions, and Europe's historic rearmament have also left their clear marks.

Despite difficult circumstances, the global economy has shown remarkable robustness. Global growth still appears to be around 3 percent – roughly in line with recent years' levels. For 2026, the starting point is therefore relatively positive – both globally and domestically. It is difficult to see a scenario where the economy truly derails, now that the so-called 'Liberation Day' is far behind us, and the US has entered into trade agreements with its most important partners. But the risk picture is far from empty, and I will be keeping a particularly close eye on four events in the new year.

First, the appointment of Jerome Powell's successor as chairman of the American central bank. President Trump has repeatedly expressed a desire for significantly lower interest rates, and it is reasonable to expect that the incoming Fed chairman will be more receptive to the White House. This need not be problematic in itself. But if markets begin to doubt the Fed's independence, it could quickly trigger renewed unrest – not least in bond and currency markets.

Second, the American midterm elections in November. Historically, midterm elections function as a temperature check on support for the sitting president. This gives Trump a relatively narrow window to deliver results on the economy, welfare, and security if Republicans are to maintain their majority in both chambers and thus continue to have a free hand for America First policy. In this light, it is hardly coincidental that there is flirtation with the idea of a so-called "tariff check" to American households. If Trump loses the majority, the course for America's economic and political direction could be adjusted once again and create new headaches for decision-makers across the globe.

Third, whether Europe emerges from the growth crisis. Hope for a better future is largely tied to Germany, like another Baron Von Münchhausen, managing to pull itself out of the swamp by its hair, after the debt brake has been relaxed and large investments in defense, infrastructure, and climate have been opened up. But the structural challenges are significant. Increasing competition from China is pressuring precisely those industries where Germany has traditionally been strongest – particularly the automotive and machinery industries. Added to this is a rapidly aging population. Without a significant productivity boost – perhaps driven by AI – it is difficult to see a new German growth miracle in the short term.

A potential wild card is a peace agreement between Russia and Ukraine. The reconstruction needs in Ukraine are enormous and will largely have to be met by European funds and companies. At the same time, peace in Europe could help lift the currently low consumer confidence and thus function as a catalyst for more robust private consumption.

Fourth, it will be central for the Danish economy whether the pharmaceutical industry's export adventure can continue to function as a growth locomotive. And in extension of this: which sectors are ready to take over if the pace slows. The significant increases in defense spending could be one candidate, just as reductions in income taxes and duties in the election year 2026 could provide a temporary boost. At the same time, there is hope that an improvement in consumer confidence could unleash the significant consumption potential that has been built up through high savings and solid wealth gains. Combined with lower interest rates and continued high housing prices, this could also breathe new life into new construction and contribute to better balance in the owner-occupied housing market – particularly in and around the larger cities.

Regarding monetary policy, I doubt further easing. But history has taught us that unforeseen events rarely announce their arrival well in advance. Should there prove to be an actual AI bubble built up in the stock markets, and it bursts with systemic consequences, there is hardly any doubt that interest rates would be lowered again – also in Europe. Conversely, new inflationary pressure could lead to interest rate increases earlier than most expect today.

As always at the entrance to a new year, one thing applies: The only certainty is that no one knows with certainty what it will bring.

Happy New Year.