AI to drive global growth in 2026 -Deutsche Bank

AI is set to be the global economy’s core growth engine in 2026, even as geopolitical tensions and political uncertainty continue to weigh on sentiment, according to Deutsche Bank’s Capital Markets Outlook (pdf). The bank expects a robust but risk-exposed global environment, with active risk management and diversification across asset classes — such as private equity, infrastructure, and private credit — essential for investors.

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AI-linked investment will remain the structural driver next year, anchored by heavy spending in the US and China. AI is a “game changer,” global chief investment officer Christian Nolting said, though he warned of overinvestment risk and energy-supply constraints, alongside rising state intervention through subsidies and export controls.

Diversification across assets in equity markets is likely to pick up, with small and mid-cap stocks potentially becoming more popular as investors eye allocations with lower interest rates, Deutsche Bank said. The bank penciled in continued gains for Big Tech, with other AI-linked sectors like industrials, energy suppliers, and construction — particularly of data centers — also set to catch up.

The bank expects most regions to see double-digit earnings growth, spread across more sectors than usual as diversification picks up, with sectors like pharma and luxury consumption set to see a boost.

It expects the S&P 500 to end next year in the green, up 9.2% from yesterday’s close, while the Eurostoxx 50 is expected to be up 4.8% from the latest close

2026 is also expected to see income from interest prioritized over capital gains, after bond markets returned to a normalized yield regime, with positive real yields in US and EU sovereigns “possible,” Deutsche Bank said.

In commodities, strategic rare earth metals will remain a priority on the back of the AI boom, with competition for access set to intensify. Oil prices are likely to remain low, near USD 60 per barrel on the back of an incoming oversupply, though gold prices may rise on demand from central banks and investors looking to add a safe asset to their portfolio. Deutsche Bank expects gold to reach the USD 4.5k mark by the end of the year.

Downside risks remain, with the bank pointing to an overhang of a possible trade conflict between the US and China with sticking points like semiconductors and rare earth minerals persisting despite partial relief from trade agreements and truces. Any additional tariffs would act as an indirect tax hitting global supply chains, the report said. Other downside risks include inflation and high levels of government debt.

MARKETS THIS MORNING-

Asian markets are mixed this morning, with Japan’s Nikkei and Hong Kong’s Hang Seng in the red, and South Korea’s Kospi and China’s CSI 300 in the green ahead of key export data expected out of China later today. Meanwhile, Wall Street futures are flat following a strong week for all three US indices.

THE CLOSING BELL-

The EGX30 rose 0.6% at yesterday’s close on turnover of EGP 7.0 bn (34.5% above the 90-day average). Local investors were the sole net sellers. The index is up 40.4% YTD.

In the green: Beltone Holding (+6.9%), Palm Hills Developments (+6.4%), and Orascom Construction (+3.8%).

In the red: Misr Cement (-3.4%), ADIB (-2.7%), and GB Corp (-1.0%).