2026 Global Markets in Flux: Watch Out for One “Grey Rhino” and Two “Time Bombs”

(Kuala Lumpur, 29th) As 2025 draws to a close, analysts say Bursa Malaysia and global financial markets will continue to face significant uncertainties in 2026, with investors urged to watch out for one “grey rhino” and two “time bombs.”

The “grey rhino” refers to the widely anticipated yet still market-moving risk of U.S. President Donald Trump’s tariff campaign. The two “time bombs” are the potentially more explosive risks of an artificial intelligence (AI) bubble and uncertainty over the U.S. Federal Reserve’s rate-cut trajectory.

Speaking to Oriental Daily Finance, iFAST Capital senior research analyst Chow Chuan Xuan said investors should be more concerned about the AI bubble risk and the magnitude of Fed rate cuts than the tariff issue.

He noted that while Trump’s tariff policies and controversial legislation will continue to add uncertainty, markets have largely “priced in” much of the impact and developed a degree of defensiveness. As a result, any new developments on tariffs are likely to trigger short-lived market moves within a broadly expected range.

Chow added that the AI theme is a bigger concern. Over the past two years, AI-related names have been a major pillar supporting U.S. equities, and markets will scrutinize earnings with higher expectations. If growth disappoints, a sharp correction could follow. He also warned that even with strong demand, constraints in power and energy supply could limit production capacity and weigh on equities.

Meanwhile, the Fed’s pace and timing of rate cuts remain another key market focus for 2026. After its final policy meeting on the 10th of this month, the Fed cut its benchmark rate by 25 basis points to a range of 3.50%–3.75%. Chow said markets generally expect two to three rate cuts in 2026, but any slowdown in easing or a sudden shift to a more hawkish stance could directly dampen capital flows from the U.S. into emerging markets.