Specialists emphasize that the direction of markets in the near term will be determined by more than one factor, from central banks’ decisions on interest rates to whether rapid investments in artificial intelligence will begin to generate real and sustainable financial returns.
So what can we expect in the stock market next year?
Will the coming year be favorable?
Swedbank’s investment strategist Vytenis Šimkus predicts that in 2026 will remain favorable to equity markets.
“Lower interest rates, recovering credit and fiscal stimulus should support economic growth and corporate performance.”
This is especially important for sectors that have been under pressure from high interest rates in recent years – industry, construction and other cyclical sectors. We are likely to see better results across a wider range of sectors, not just concentrated in technology,” he commented.
However, the specialist emphasizes that due to extremely rapid investments in artificial intelligence (AI), part of the stock market seems overvalued, and the high importance of this sector makes the market vulnerable.
Therefore, any sharper change in expectations in the technology sector can provoke a sharp correction in the markets.
What will lead to change?
According to V. Šimkaus, next year the share prices will be mostly adjusted by decreasing taxes in the USA, higher costs in Japan and Germany, significantly reduced interest rates and extremely cheap energy.
“All these factors should have a very positive effect on the financial results of companies. US economic policy should avoid drastic steps in the run-up to the midterm elections,” pointed out the Swedbank investment strategist.
He also added that changes in the value of currencies can significantly contribute to changes in stock markets, as was the case this year.
“Changes in the value of currencies are extremely relevant for investors this year. The strong devaluation of the dollar at the beginning of the year greatly worsened the results of Europeans investing in the USA. This risk may be relevant next year as well,” stressed V. Šimkus.
Rasa Platūkienė, head of the Trade Department of the Market Operations Department of the Bank of Lithuania, explained that there are basically two reasons for the rise in US stock prices: the development of AI infrastructure in the US and the dynamics of US base interest rates.
According to her, when it comes to the narrative of AI infrastructure development and cosmic-scale investments, the dynamics of US stocks in 2026 will depend on whether there will be real and profitable cases of applying AI in business.
“At the moment, the rise of US stocks is based on the development and expansion of AI infrastructure: new data centers are being built, centralized data warehouses are being developed, cloud services are being created and developed, supercomputers are being installed for model training, etc. Companies developing AI infrastructure are merging and buying each other, essentially financing themselves and thus further inflating their stock prices.”
Shares of AI infrastructure companies are rising due to mass belief in promises that investments in AI solutions will one day pay off with big profits. However, the longer real and profitable cases of using AI in business do not appear, the more tension arises due to the overvalued shares of companies developing AI infrastructure, the more fear and disappointment there is in the market due to the possible bursting of a bubble in the US stock market”, the interviewer pointed out.
Speaking about interest rates at that time, R. Platūkienė notes that the lower the interest rates, the more profitable it is for businesses to borrow and develop production and business development.
“In the spring of 2026, US President D. Trump will nominate a new chairman of the US Federal Reserve Bank, who is already under unprecedented pressure to cut interest rates significantly, regardless of the state of the US economy. US debt servicing costs already exceed US defense costs, and high interest rates are becoming more of a challenge,” she noted.
This means that if interest rates remain low or lower, it is likely that stock prices may continue to appreciate. Of course, if there are no other unforeseen circumstances that change the rules of the game.
Time will tell whether it will affect the Lithuanians
When it comes to the stock market, it is not uncommon to hear about its heating up.
However, V. Šimkus believes that the market is heated only in the technology segment, because technology giants are throwing huge funds into the development of AI and the construction of data centers.
“But the market is increasingly skeptical about the prospects, we see small periodic corrections and a constant change of market leaders,” he said.
A significant number of Lithuanians accumulate money in the second tier of pensions, that is, they indirectly own shares, so the results of the markets are directly reflected in the results of their funds.
Swedbank’s investment strategist notes that if the economic stimulus really works, and a sharper technology correction is avoided, residents should observe decent returns in pension funds next year.
“Risks may materialize, but the long-term perspective of pension funds allows us to ignore short-term fluctuations,” pointed out V. Šimkus.
R. Platūkienė noticed that the dynamics of US stock prices and until now usually determined the changes in the prices of other developed markets, including European stock prices.
This means that when the US stock bubble bursts, European stock prices could fall as well.
“However, we are observing the picture of rapidly changing geopolitics and the changing world order. As mentioned, the rise of US stock prices is fueled by the development of AI infrastructure, but in Europe there is a new narrative, less correlated with the US AI infrastructure, focused on the European Union’s strategic defense initiative plan, which foresees investments of 800 billion euros for the development of European defense and security, the development of industrial capabilities, and the mobilization of private capital,” she commented.
The LB representative noted that for these reasons, the dynamics of European stock prices may differ from the dynamics of US stock prices.
“Therefore, Lithuanians investing in shares in pension funds will not necessarily be negatively affected by the bursting of the US stock bubble, if it happens next year. Time will tell,” observed R. Platūkienė.
