Power Play: investing in the new electricity era
Globally, demand for electricity is rising faster and more markedly than we have seen in years. Not because the population is growing substantially, but because our modern economy needs more and more electricity. At the same time, supply is colliding with an unexpected bottleneck: the electricity grid itself. What does that mean for the economy, for companies ... and ultimately for investors?
Mark Van Assche, account manager Private Banking and Wealth Office, talks about it with Heng-Ta Quach, CRM at KBC Asset Management.
26/02/2026
Economy
- Weakening job growth and declining savings surpluses, together with inflation remaining high due to higher import tariffs, weigh on the purchasing power of the American consumer. A recession is not expected by our economists.
- The figures for the fourth quarter of last year have been revised slightly upward, but those of this year remain unchanged. Admittedly, growth is slightly lower than what we could notice in recent years. So we are still talking about a growth slowdown.
Commodity prices and inflation
- Inflation figures appear to be under control. It is above target in the US, while being around 2% in Europe. Reported figures do not show the impact of the sharp rise in oil and gas prices as a result of the unrest in the Middle-East however.
- Strategic reserves are used, but attacks on infrastructure remain.
- In the US the Supreme Court ruled that President Trump did not have the constitutional power to increase tariffs. He reimplemented them shortly after under a different section. In the meantime, the Trump administration is investigation other means to impose tariffs.
Budgetary and monetary policy
- The 'Big Beautiful Bill', which mainly extends the expiring tax cuts from Trump's previous term, is expected to provide a limited boost to growth. Meanwhile, the US government shutdown has been lifted for the time being.
- China continues to regularly support its flagging economy with new policy measures. In the euro area, the major investments announced for defence and infrastructure are gradually taking more concrete shape.
- The ECB kept the deposit rate at a constant 2% in July and makes further steps dependent on the economic data. Some voices suggest the ECB might hike rates as a result of the rising energy prices. Our economists do not expect them to cut interest rates further next year. The Fed kept rates stable as expected. We expect two more rate cuts in the second half of the year.
- US President Trump has assigned Kevin Warsh as the next chairman of the Fed, this still needs to be ratified by the Senate.
Bond markets
- Despite weaker growth, falling inflation and policy rates, bond yields remain at somewhat higher levels in both the US and Europe.
- The budgetary turn made by the new German government, in which the debt brake was released and a generous budget was allocated for recovery policy and defence spending, explains the higher interest rates in Europe.
- As a result of inflation fears after the rise in energy prices, interest rates have risen recently.
Stock markets
- The stock markets are starting to feel the pain of higher energy prices after a strong start of the year, yet we have not seen them fall too harshly.
- Profit expectations are strong for the year which explained the strong performance. Investments, by governments and in AI infrastructure fuel profits. Meanwhile, high valuations and optimistic earnings expectations reduce the margin for error. The earning season is nearing its end, with a great dispersion but overall a strong growth, certainly in the US.
Risks
- The conflict in Iran enters its third week, with diverging messages about the expected further duration and more intense attacks on energy infrastructure.
- The US president wants to acquire Greenland but does not want to use military force.
- In Ukraine the situation seems to be moving in the right direction but we don’t have a solution yet.
- Private credit is gaining more attention, with increased write-offs and unrest.
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