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Global Leading Indicator Turning Higher

January 27, 2026

Time to Read: 2 minutes

Headline volatility persists and yet the global growth outlook continues to improve. We examined a leading indicator that supports diversifying equity holdings if you haven't already.

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Headline volatility has risen recently as geopolitics in different corners of the globe play out on the world stage. While these headlines have been a source of uncertainty, the global economic outlook for 2026 appears to be improving.

The Organisation for Economic Co-operation and Development operates as an international forum for democratic countries to promote economic growth. Its G20 Composite Leading Indicator Index, a proxy for global activity, has reached its highest level in three years. This means that some of the world’s largest economies are expected to experience growth near or above long-term trends. Historically, an improved outlook has led to positive equity returns across both developed and emerging markets.

What does this mean for investors? Despite these headlines, stocks have proven resilient with positive equity returns year to date across the major global equity indices. Given this improved outlook, we have recently recommended increasing exposure to international and emerging markets to capture potential upside. While we still favor U.S. equities, we believe global diversification will remain critical in the year ahead.

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A Broader Foundation for Earnings Growth

Although companies benefiting most directly from AI-related capital spending are the main drivers of higher earnings, strength is no longer confined to that group. Earnings across the broader market remain solid and are expected to grow more than 10% this year and next, suggesting market concentration risk is limited.

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Is the Job Market Stabilizing?

After sluggish job growth in 2025, investors are looking for signs that the labor market may be stabilizing. With consumer spending driving 70% of economic activity, an improving labor market is essential to sustaining economic growth.

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Will Markets Remain Resilient?

Global equities have risen an annualized 11% since 2020 despite repeated shocks, as resilient growth and earnings have helped markets recover from periods of volatility. While the U.S.-Iran conflict poses near-term inflation and growth risks, markets remain constructive as earnings expectations continue to improve.

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