Economy: Positive growth contributions expected from the US and Germany

We expect economic growth in the US to pick up in 2026 thanks to AI, and we see an increase of 2.1 per cent after 1.9 per cent in 2025.

In the eurozone, gross domestic product is expected to grow by 1.1 per cent in 2026, with Germany leaving the period of stagnation behind and growing by 1.2 per cent. This year, growth was only 0.3 per cent.

Inflation: Eurozone close to target, US likely to continue experiencing significantly higher price increases

Inflation in the US is likely to remain high or even rise slightly in the coming year. We expect an inflation rate of 2.9 per cent, compared with 2.8 per cent this year.

Price increases appear to be much better under control in the eurozone. By 2026, they are expected to fall to the ECB's target of 2.0 per cent.

Central banks: USA – two further interest rate cuts expected. A third key interest rate cut could come with Hassett.

The US Federal Reserve has a dual mandate: maximum employment and price stability. Even though price stability is unlikely to be achieved in 2026, the Fed will most likely cut key interest rates twice by 0.25 percentage points to 3.0 to 3.25 per cent due to weaker labour market data.

The term of Fed Chairman Jerome Powell ends in May next year, and he is facing ongoing massive pressure from the US government, which would like to see interest rates lower. If Donald Trump's obvious preferred candidate, Kevin Hassett, wins the race to succeed him, a third key interest rate cut could follow as a kind of ‘welcome gift’.

For the eurozone, we expect the European Central Bank to leave interest rates at their current level.

There will likely be no way around US equities in 2026 either

The stock market traffic light remains green for us. Our positive assessment is based primarily on the expected development of corporate earnings. These are likely to grow at double-digit rates in the US over the next two years, driven by technological developments, in particular the increased use of artificial intelligence (AI). We do not see an AI bubble, but rather a continuing AI boom. The differences compared with the situation in 2000, when the dot-com bubble burst, are striking. Back then, internet and technology companies were valued much higher. The price-earnings ratio was 52, twice as high as it is today. In addition, the composition of expected total returns on equities in the early 2000s differed significantly from the situation today.

At the peak of the bubble in March 2000, the market assumed that valuations would continue to rise. Today, the situation is different. Return expectations are mainly fuelled by rising profit expectations. The combination of easing monetary policy – especially in the US – and the associated more favourable financing conditions for companies should also have a supportive effect. As we assume that the high investments in AI will pay off for companies, the necessary productivity gains are likely to be realised to a greater extent. Against this backdrop, we consider the US to be the most promising market for the coming year.

Expansionary fiscal policy, particularly in Germany, is a positive factor for Europe. In addition, infrastructure and defence spending should make a significant contribution in 2026 to double-digit profit growth in Germany's leading index, the DAX. We have recently overweighted European equities.