Wall Street is entering 2026 with equity prices near highs, volatility subdued and the prevailing assumption that any setback will be temporary. The problem is that a fourth consecutive year of double-digit gains requires an unusually clean macro and policy backdrop at a time when the list of plausible disruptions is lengthening rather than shrinking.

The headline contradictions are already visible. The U.S. economy is decelerating, financing conditions remain restrictive even after last year’s rate cuts, and the market’s biggest profit narrative, artificial intelligence, still has to prove it can translate capital spending into durable earnings growth rather than just valuation expansion.

European Union leaders agreed on Monday to do more to bolster their defences against Russia and other threats by increasing spending and addressing gaps in military capabilities. “A lot has been done already but we need to do more. We need to do it better, stronger, faster – and we need to do it together,” said Antonio Costa, president of the European Council…

Brussels is preparing to turn the screw on high-carbon imports. New draft plans for the EU’s Carbon Border Adjustment Mechanism (CBAM) suggest that, from next year, foreign producers of aluminium, cement, fertilisers and, indirectly, steel could face steeper carbon costs than most had pencilled in, as the European Commission tightens the benchmarks it will use to calculate the levy.

From January, CBAM moves from its current “reporting only” phase into one where importers must start paying for the CO₂ embedded in certain carbon-intensive goods they bring into the bloc. In effect, the system extends the EU Emissions Trading System (ETS) to selected imports: if a tonne of emissions costs EU producers €80 under the ETS, imports should ultimately face a comparable burden, offset by any carbon price already paid at home.