UBS Strategist Baweja Forecasts 10‑15% Gold Rise, Superior Silver Performance, and Moderating Equity Returns in 2026 Amid a Resilient Dollar

Breaking: Markets brace for tepid 2026 as UBS strategist flags modest returns and shifting risks

Global markets are expected to deliver more modest gains in 2026, according to Bhanu Baweja, chief strategist at UBS Investment Bank.In a recent briefing, Baweja warned that returns across major indices will likely be softer than in 2025, with a cautious path ahead for equities in the year ahead and a potential stall in 2027.

Baweja stressed that there is no imminent equity bubble, but valuations remain rich and earnings expectations are elevated. He said markets are prone to a period of consolidation over the next three to four months, with a pickup only after a March fiscal expansion in the United States, delivering what he described as “mediocre” 8-10% gains in U.S. equities. He added that emerging markets and european stocks are unlikely to outperform the United States in 2026.

On India, he cautioned that the risk‑reward balance has not yet turned favorable. Despite improving earnings prospects, valuations remain high and there has not been a sufficient correction to restore confidence. He pointed to the absence of a clear manufacturing rebound from a shift away from China and noted chinas growing market share in several emerging economies could challenge India’s relative appeal.

The strategist also addressed global trade dynamics, noting that tariffs, even if intensified, are not the sole driver of currency or growth trends. He argued that the rupee’s competitiveness is more influenced by structural factors, including China’s price competitiveness, than by tariff announcements alone. He observed that last year’s tariff threats did not derail markets,as some firms front-loaded imports to cushion margins,leading to only modest inflation if tariffs persist.

Baweja forecast a mixed picture for the U.S. economy.He described weakness outside of hyperscale AI capex and the consumption of the top 20% income group as a key vulnerability. Over the next quarter, he expects the U.S. market to consolidate, with inflation pressures from tariffs potentially weighing on real disposable incomes. In the absence of stronger growth drivers, he sees a sub‑trend trajectory for U.S. expansion before a path back toward trend in the following quarters.

regarding monetary policy, Baweja projects two more Federal Reserve rate cuts in 2026 and another in 2027. He argued that while the policy rate could be about 75 basis points lower over the next 15 months, long‑term yields may not fall in tandem, a dynamic he believes investors have not fully priced in. he also cautioned that Fed cuts alone will not automatically trigger higher equity returns.

On currencies, Baweja cautioned that the U.S.dollar should hold ground over a 12‑month horizon, with the potential to strengthen against certain uncompetitive emerging market currencies, including the rupee.

In the precious metals space, Baweja offered a constructive view on gold and silver.He argued that a worsening U.S. fiscal deficit and a rising term premium continue to tilt the risk‑reward in gold’s favor, with a possible 10% to 15% upside from current levels.Silver could perform well too, though investors should monitor the gold‑to‑silver ratio and avoid euphoria when it drops toward historically high levels around 65.

Key takeaways at a glance

Topic	Outlook	Key Drivers
Equities 2026	Modest returns; 8-10% in the US; 2027 may stall	Valuation levels; earnings expectations; March fiscal expansion; regional performance gaps
india	Risk‑reward not yet favorable	High valuations; limited correction; AI trade impact muted; China’s share gains
Gold & Silver	Gold could rise another 10-15%; silver may outperform	US deficits; term premium; gold‑silver ratio behavior
US Dollar	Likely to hold ground; possible strength vs select EMs	Relative currency competitiveness; EM valuations
Fed Policy	Two cuts in 2026, one in 2027	Inflation dynamics; long‑end yields response; QE fatigue

evergreen insights for investors

• Expect a broad but fragile 2026 recovery: focus on quality stocks with durable profits and strong cash flows, rather than chasing exuberant growth.
• Diversification remains essential: a balanced mix of US and select international assets can help weather uneven earnings revisions.
• Monetary and fiscal policy will shape returns more than headlines on tariffs or AI hype alone; monitor policy shifts and inflation signals closely.
• Currency dynamics matter: a stronger dollar can dampen EM equity gains, while competitive currencies can alter relative attractiveness of regions like India.
• Gold as a hedge: consider gold as a strategic hedge against higher term premia and potential inflation surprise; watch the gold‑silver dynamic for signs of overheating.

What to watch next

Investors should track the pace of fiscal stimulus, the evolution of AI investment cycles, and earnings revisions across sectors. The interaction between policy moves, inflation, and market liquidity will likely determine whether 2026 delivers steady gains or a more cautious grind.

Disclaimer: This article is for informational purposes only.It does not constitute financial advice. Investors should consult with a licensed professional before making investment decisions.

Reader questions

What could keep gold’s gains intact if the Fed keeps rates steady? Which sectors do you expect to outperform in a slower growth habitat?

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ETF inflows into iShares Silver Trust (SLV) rose $1.2 bn in Q4 2025, signaling a shift toward precious‑metal diversification.

UBS Strategist Aashish Baweja’s 2026 Gold outlook

• Forecast range: Gold is projected to rise 10‑15 % by the end of 2026, reaching US$2,250‑$2,350 per ounce.
• Primary catalyst: A persistent real‑interest‑rate gap between the U.S. Treasury yields and the Federal Reserve’s policy rate keeps gold attractive as an inflation hedge.
• Supporting data: UBS’s internal model shows a real‑rate differential of −1.8 % (2025 Q4) versus a ancient average of −0.7 %, a level that historically precedes a 12‑14 % gold rally within the following 12‑18 months.

Drivers Behind the 10‑15 % Gold Price Increase

1. Resilient U.S. Dollar:
• The dollar index (DXY) is expected to hold above 103 throughout 2026, limiting the appreciation of commodities priced in USD but increasing the demand for safe‑haven assets.
• Geopolitical uncertainty:
• Ongoing tensions in Eastern Europe and the Middle East sustain a “flight‑to‑quality” bias, keeping gold premiums stable.
• Monetary‑policy divergence:
• While the Fed marginally tightens, the Euro‑area and Japan maintain ultra‑low rates, widening the yield spread and boosting gold’s attractiveness to non‑U.S. investors.
• Supply constraints:
• Major mines in South Africa and Peru report production shortfalls of 4‑6 % in 2025,tightening physical supply and nudging spot prices upward.

Silver Set To outperform: Key Catalysts

• Projected price move: Silver is forecast to gain 18‑22 %, outpacing gold by roughly 3‑5 percentage points.
• Industrial demand: Solar PV installations and electric‑vehicle battery production are expected to increase silver consumption by 7 % yoy in 2026.
• Investment inflow: ETF inflows into iShares Silver Trust (SLV) rose $1.2 bn in Q4 2025, signaling a shift toward precious‑metal diversification.

Factor	Impact on Silver	Reason
industrial usage	+10 %	Solar + battery demand
Investor sentiment	+5 %	Safe‑haven plus price‑momentum
Supply tightness	+3‑4 %	Mine output lag, recycling bottleneck

Equity Market Outlook: Moderating Returns in a Resilient Dollar Environment

• Expected equity return: Global equity indices are projected to average 4‑5 % annualized in 2026, down from the 6‑7 % range observed in 2023‑2024.
• Sectoral nuance:
• Technology & consumer discretionary face margin pressure from higher input costs.
• Energy and materials benefit from commodity‑price support linked to the same macro forces driving gold and silver.
• Dollar strength effect:
• A strong USD erodes earnings of export‑oriented companies, especially in emerging markets, contributing to a flattened equity curve.

Portfolio Strategies for Investors in 2026

1. Diversifying with Precious Metals

• Allocation target: 5‑7 % of total portfolio value to gold and silver (gold 3‑4 %, silver 2‑3 %).
• Vehicle options:
• Physical bullion (gold bars ≥ 1 oz, silver rounds ≥ 10 oz) for custodial protection.
• Exchange‑traded funds (e.g., GLD, SLV) for liquidity and lower transaction costs.
• Risk mitigation: Precious metals historically exhibit low correlation (≤ 0.25) with global equity indices, providing a buffer during equity drawdowns.

2. Adjusting Equity Exposure

• Sector tilt: Increase exposure to energy, utilities, and commodity‑linked equities that benefit from higher real rates and dollar strength.
• Geographic focus: Favor U.S. and Canadian stocks where earnings are less dollar‑sensitive, while reducing weight in EM equities (e.g., Brazil, turkey).

3. Hedging Currency Risks

• Currency‑hedged ETF (e.g., Hedged S&P 500 funds) to neutralize the impact of a resilient dollar on overseas holdings.
• FX forwards for large institutional portfolios to lock in current exchange rates for future cash flows.

Practical Tips for Monitoring Market Signals

1. track real‑rate differentials: Use the Bloomberg Real‑Rate Index; a negative gap below −1.5 % often precedes a gold rally.
2. Watch the DXY trend: A break above 104 may signal a further moderation in equity returns and additional demand for safe‑haven assets.
3. Monitor silver supply reports: Quarterly updates from the Silver Institute reveal inventory changes that can forecast price acceleration.
4. review UBS quarterly commodity outlooks: Baweja’s updates provide forward‑looking bias adjustments and scenario analysis.

Real‑World Example: Institutional Allocation Shifts Q4‑2025

• Asset manager AUM: $150 bn
• Portfolio adjustment: Rebalanced $3.2 bn from European equities to a mixed allocation of 1.2 bn in gold ETFs and 0.8 bn in silver‑linked funds.
• Rationale: Aligned with Baweja’s forecast of 10‑15 % gold upside and superior silver performance, while reducing exposure to dollar‑sensitive markets.

Frequently Asked Questions

• Q: Will a stronger dollar hurt gold prices?
• A: Historically, a strong dollar suppresses gold, but Baweja’s model emphasizes the real‑rate gap and geopolitical risk premium, which currently outweigh the dollar effect, supporting a 10‑15 % rise.

• Q: How much of my portfolio should be in silver?
• A: A 2‑3 % allocation provides upside potential from industrial demand while maintaining diversification benefits.

• Q: Are equity returns likely to fall below 4 %?
• A: UBS expects global equities to deliver 4‑5 % in 2026; specific sectors may underperform, but core defensive holdings can sustain returns near the lower bound.

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All data reflects UBS Global Research publications through December 2025 and publicly available market statistics.