The market looks calmly at 2026, but with doubts about liquidity

At first glance, the setting is almost idyllic. Lower interest rates, declining inflation and no immediate signs of recession in the large economies. From New York to Frankfurt, The markets enter 2026 without major shocks. The discourse that has been prevailing in recent months points to an orderly rotation, a soft landing and artificial intelligence (AI) that maintains the bullish pulse of large technology companies. In this apparently stable context, a question that the market has not yet fully resolved is beginning to gain weight as to whether the available liquidity will be sufficient to continue supporting valuations.

The doubt is not new, but it gains weight as monetary conditions leave behind the most aggressive expansionary phase and enter a dosing stage. Bank of America estimates that there will be 78 rate cuts worldwide in 2026, a not inconsiderable figure, although much lower than those of 2024 and 2025when 164 and 155 cuts were accumulated respectively. Even so, the bank considers that this downward trend is still enough to sustain the stock markets at current levels, with a forecast growth of 8% for the MSCI ACWI index.

However, sustaining is not the same as boosting. That nuance is starting to be relevant. Because what until recently was an almost unconditional money environment, now becomes a more demanding, more selective process with less room for error.

Monetary expansion no longer runs alone

JP Morgan AM’s annual report on global outlook is clear in this regard. By 2026, the manager expects a still constructive liquidity environment, but clarifies that the flows will no longer be as broad or as automatic. “Liquidity is still available, but is more conditional on profit visibility, macro stability and fiscal discipline“, they explain. A vision that is also shared by Fidelity International and Goldman Sachs, where there is no longer talk of stimulus, but of efficient capital allocation.

The context helps to understand the change. The Federal Reserve (Fed) has cut rates six times (three in 2024 and three in 2025) since September 2024 and keeps the doors open to at least two additional cuts during 2026, according to Reuters. But it has also begun to slow its balance sheet reduction process. In fact, it has once again bought short-term debt to ease tensions in the financing markets. The measure is presented as technical, but it is still a sign that the room for maneuver is no longer unlimited.

In the case of the European Central Bank (ECB), the margin is even smaller. Standard Chartered and AXA Investment Managers agree that, after the cuts made in 2025, there will most likely only be room for a final cut in 2026, if that. Rent 4, on the other hand, believe that none will occur. The message that is consolidated in Frankfurt is that monetary policy has played its role, but it cannot continue to do all the work.

As that monetary support loses intensity, the focus shifts to what factors are really supporting valuations. For now, the market is supported by the strength of the results, the technological pull and a rotation that maintains active buying pressure. But that same rotation also implies that money moves, changes destination and does not stay still.

As Juan Carlos Ureta, president of Renta 4, recently explained, liquidity “moves from one sector to another and from some securities to others, which causes the indices to remain or rise without the need for additional stimuli.” That dynamic, according to Ureta himself, is the main antidote against a crash.

But not all the market reacts the same. While big technology companies resist, some are already showing signs of fatigue. Alphabet has corrected more than 3% in the last week. Amazon accumulates a drop of more than 2% in the last month. Nvidia, which was coming off a 36 percent annual appreciation, has cut 5% in the last 30 days. At the same time, defensive stocks and small-cap companies are beginning to attract capital flows that were previously concentrated in the big names in the technology sector.

The Russell 2000, an index that groups US small caps, has reached all-time highs. And firms like State Street or Schroders see this rotation as a sign of maturity, not weakness. “The market is readjusting towards assets that offer relative value and less dependence on the multiple,” they point out from Pictet Asset Management.

But even with this rebalancing, the financial system continues to navigate on a basis of trust. It’s not just a question of liquidity, but of perception about the stability of the rules of the game. Here a less visible factor comes into play, but one that is increasingly mentioned by investment banks and multilateral institutions: the legal and financial security of safe haven assets.

The ECB’s financial stability report published in November warns of possible disruptions in non-banking segments of the system, where liquidity is not so evident. Shadow banking, private credit and the real estate sector show high levels of leverage and some dependence on conditions that may not hold if the flow of capital slows or changes direction.

Furthermore, decisions such as the management of frozen Russian assets have reactivated the debate. What happens if countries that hold international reserves begin to doubt the financial neutrality of the United States or the Eurozone? Could this alter the holding map and modify structural capital flows? According to TD Securities, any move toward directly using those assets as debt collateral could open a new chapter in the global distribution of liquidity. And although it would not mean an immediate shortage of money, it could make financing Western deficits more expensive and alter the current balance between traditional refuges and emerging alternatives.