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.
- n 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. This creates temporary uncertainty, in part because the EU postponed the vote on the new trade deal.
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, although it looks as if their impact won’t be felt fully until 2026-27.
- The ECB kept its deposit rate unchanged at 2% in September, with further movements dependent on economic data. Our economists do not expect the Bank to cut interest rates further next year. As expected, the Fed kept interest rates on hold. We still expect rates to be cut on two more occasions, but now in the second half of the year instead of the first half.
- US President Donald Trump has nominated Kevin Warsh as the next chair of the Fed, though the nomination still has to be passed 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
- Stock markets have again hit new all-time records in recent weeks. The markets got off to a strong start this year after a solid 2025. Earnings forecasts for the fourth quarter of 2025 and for this year are strong, which accounts for the solid performance.
- The outlook for government investment and investments in AI infrastructure is boosting profits. However, these high valuations and optimistic earnings forecasts reduce the margin of error. The results season, which is in full swing, is leading to extreme dispersion in the AI trade and that is now also spreading to other sectors.
Risks
- The US and Israel have started a military operation in Iran, where a major part of leadership has been taken out. Iran replied with attacks on military bases around the region. It is unclear if there are talks about ending the conflict.
- 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.
- Unrest about private credit after a few bankruptcies remain in the back of investors’ minds.
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