What 2026 may hold: A fracturing America, a rising Europe and an unsettled world

Before we get to 2026, here is a quick report card on my trend predictions last year for 2025. Donald Trump and Elon Musk did fall out, proving yet again that uber egos will dominate logic every time. As expected, the US market did less well than Europe and emerging markets, marking an end to the age of US exceptionalism.

In cricket, the Indian men’s team had a mixed year, with coaching and selection looking rather mercurial, while the women’s team shone. ‘Agentic’ is a lead candidate among businesses for word of the year, but ‘vibe coding’ and ‘slop’ are more popular with consumers.

And now for 2026, categorized as usual in terms of probability.

High probability (above 70%): One year into his presidency, we are witnessing ‘peak Trump.’ The exact angle of descent is unknowable, but the power and influence of this administration looks set to decline. Extreme systems usually collapse from within and signs of it are evident in internal fissures.

The Trump coalition is made up of six main factions: one, MAGA populists with strong ‘America First’ views; two, the US religious right, motivated by social issues like abortion and school books; three, fiscal hawks inherited from the Tea Party; four, the multi-racial right motivated by economic and cost-of-living issues; five, tech bros motivated by deregulation and government staying out of spaces like AI and crypto; and six, fringe far-right groups openly hostile to democratic inclusiveness.

These factions are now warring, and, for the first time, Trump acolytes like Marjorie Taylor Greene have become openly critical of Trump’s handling of the Epstein files. Erika Kirk, wife of slain conservative activist Charles Kirk, has endorsed J.D. Vance as the Republican Party’s next presidential candidate. Even a stacked Supreme Court might not rule on Trump’s side on every major decision.

Trump’s latest National Security Strategy says that Europe faces “civilizational erasure." Au contraire, Europe is wealthy and has the manufacturing and scientific base to grow again.

Germany’s once-in-a-generation fiscal spending will likely catalyse Europe’s gentle reawakening. Germany has eased its debt brake on defence spending, which could rise to about 3.5% of GDP by 2029. It also plans infrastructure spending, deregulation and labour-market reform. The German DAX index has handsomely outperformed the S&P 500 this year and this will probably continue in 2026.

While the rate of change may moderate, the euro will likely continue its appreciation against the US dollar (the European currency is up nearly 13% year-to-date).

India’s much delayed 2021 census will be conducted in 2026. It will be India’s first fully digital census. The total population is unlikely to be widely off from estimates of 1.44 to 1.48 billion. However, it will throw up many surprises, since it will be India’s first caste count since 1931. It will also form the basis of delimitation for Lok Sabha seats. Both issues are politically potent and are likely to result in societal tensions.

The frenetic pace of progress in artificial intelligence (AI) and its rub -off on AI investments and valuation will reach a crescendo this year. While the technological impact of AI will endure, watch for cracks to appear in the market, with highly indebted companies at most risk.

Medium probability (above 50%): Based on current squad strength, home advantage and recent T20 dominance (India has won 80% of its recent games), the Indian men’s team is a favourite to make the semi-finals of the T20 World Cup, with a 30% chance of making it to the finals (in a multi-country context that is a very high probability).

The odds-on favourites to make the semi-finals of the FIFA World Cup in 2026 are Spain, France, England and Argentina. Brazil, Portugal or Germany could crash the semi-final party. It will be Canada’s first time, the US’s second and Mexico’s third time as co-hosts of this event.

Augmented and virtual reality (AR and VR) are likely to go mainstream this year. Human-first content will vie with AI-generated content for authenticity and trust.

Uncertain probability: The ‘what next’ question in Gaza will be answered this year. Some version of an international stabilization force, as envisaged in the second phase of the Gaza peace plan, is likely. The substantial bill for rebuilding Gaza will have to be borne by an Arab coalition.

The Ukraine war will likely end in 2026 , mostly as a result of the exhaustion of all parties involved, with a tilt in Russia’s favour. Tragically, the civil war in Sudan will likely continue because the attention bandwidth of the rest of the world is consumed elsewhere.

As in 2025, there will be much hot air this year too about climate change strategies, but little real action. China’s fraction of renewable power will cross half its total capacity this year. It is also making rapid progress towards commercializing nuclear fusion for power.

All in all, 2026 will be a year in which the US sees more turbulence than elsewhere.

P.S.: “Prediction is very difficult, especially if it is about the future," said the wise Yogi Berra.

The author is chairman, InKlude Labs. Read Narayan’s Mint columns at www.livemint.com/avisiblehand