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Throughout 2026, The Common Sense has maintained a positive assessment of the prospects for the global economy and markets, often in contrast with prevailing commentary about the consequences of American tariffs, the wars in Ukraine and the Middle East, disruptions to global energy supplies, and rising geopolitical instability. The argument has been that the underlying strength of the international economy, the resilience of its leading businesses, the capacity of markets to adjust to changing circumstances, and the fact that the oil price has remained within the bounds of its long-term inflation-adjusted average would prove more important to the outlook than the immediate consequences of wars and tariffs and the often hysterical media reporting around those events. The latest forecasts from the International Monetary Fund (IMF), released yesterday, further reinforce the case for optimism.

The chart below shows the IMF’s January, April, and most recent October forecasts for the global economy and several of its subsets and regions.

The global number is just 0.2 of a percentage point below its pre-Iran war estimates. The advanced-economy outlook has lifted through the year. The United States (US) is a fraction of a point down. The euro area marginally down. Emerging markets, which includes the Middle East, are still strong, down only half a percentage point from January. China is as strong as the level in January. Sub-Saharan Africa is strong. And it is only really South Africa that is sharply down – a consequence of how vulnerable its domestic politics make the local economy to global shifts.

The Common Sense’s upbeat global outlook has rested on several judgements through the year.

The first is that the US remains a remarkably powerful engine of international economic growth, supported by its domestic market, technological leadership, investment capacity, and the adaptability of its firms.

The second is that the consequences of American tariffs, although disruptive, would be mitigated over time as businesses adjusted supply chains, prices, production, and investment decisions.

The third is that the economic consequences of the war involving Iran, while potentially severe for energy markets and particular industries, would be unlikely on their own to precipitate a sustained global economic collapse – for the simple reason that major economies were geared to the risk and that the oil price has not breached its inflation-adjusted long-terms levels.

A fourth judgement is that the extraordinary investment flowing into artificial intelligence (AI), computing infrastructure, and related technologies represents an important new source of economic demand, with the prospect of significant longer-term productivity gains.

These assessments have informed a series of calls made through the year.

In February, we argued that American economic resilience was being underestimated. Strong employment figures, improving wages, and sustained investment suggested that the American economy had entered 2026 in better condition than many analysts appreciated. We also anticipated that dollar weakness could create favourable conditions for currencies such as the rand, with Bheki Mahlobo having previously suggested that the South African currency could test R16.00 to the dollar during 2026. The currency subsequently reached that territory – and has remained resilient.

See the chart below, which tracks the rand against the US dollar index over the past three years.

The war in Iran provided a considerably more severe test of our assessments. From the opening phase of the conflict, our analysis distinguished between the immediate consequences of military escalation and the longer-term capacity of the global economy to absorb the shock. We anticipated pressure on oil prices, disruption to shipping and logistics, and increased volatility in equity and currency markets. But we also argued against extrapolating those disruptions into an assumption that global economic activity would suffer a prolonged collapse.

Our central expectation was that the political and economic pressures bearing upon Washington and Tehran would create powerful incentives to contain the conflict, even if its underlying strategic causes remained unresolved. To a great extent, as the latest IMF data reveals, that has held true. Our biggest error was that while we predicted that the Americans would exit the conflict in June, causing oil to drop to a range of between $65 and $73, which is what occurred, we did not anticipate the Americans re-engaging with Iran at scale into the end of the year. Our initial and subsequent understanding is that June was the plan, as we had set it out, and that the subsequent re-engagement was to an extent an impulsive call. Nonetheless, our advice that the war would not sink the global economy, the key thing, has held up.

Our assessment of markets was that these would outperform despite the considerable volatility of the wars, tariff decisions, and fearmongering in the media.

The chart below shows the indexed performance of the S&P500 and major emerging markets over the past 12 months.

Particularly pleasing is that our early-stage Iran war advice, that global markets would hold up strongly, played out exactly as expected.

One particularly important source of strength is the investment associated with AI. The construction of data centres, manufacturing of advanced semiconductors, expansion of electricity generation and transmission infrastructure, and development of associated industrial capacity are all economic activities in their own right. They generate demand for construction, engineering, energy, specialised labour, and capital equipment. Much of this demand is transmitted across national borders, supporting economic activity beyond the countries in which the original investments are made. The IMF’s assessment reinforces the significance of this investment in offsetting some of the weakness associated with energy shocks and disruptions to trade.

None of this implies that the risks are negligible. The IMF expects global inflation of 4.7% in 2026 and 4.1% in 2027, reflecting continuing pressure from energy and other costs. High public debt, rising borrowing costs, and the possibility of further geopolitical escalation could compound those difficulties. There is also a risk that elevated valuations among technology businesses will prove vulnerable if the commercial returns on AI investment fall short of expectations. A favourable outlook for economic growth does not mean that financial markets will advance without interruption.