The authors: DJE's strategy team monitors and evaluates the markets on an ongoing basis using the in-house FMM method according to fundamental, monetary and market-technical criteria.
We are constructive for December and the beginning of 2026. The seasonal factors generally point to a solid end and start to the year, which is supported in monetary terms by the third interest rate cut by the US Federal Reserve in the current year 2025.
At present, it is conceivable that the situation on the markets could become more difficult from around the middle of the year, partly due to very large new issues that could temporarily drain liquidity from the market. Looking ahead to 2026, the earnings performance of US companies is expected to be more positive than that of European companies, although US companies are also valued higher. However, the further development of the US dollar remains difficult to forecast. A slight weakening of the US dollar initially seems possible until there is clarity about the new Fed chair in May and a fundamentally driven stronger dollar trend could set in. Gold and emerging markets, such as Mexico, continue to be seen as positive additions. In the bond sector, the focus remains on short to medium maturities.
Opportunities that we see:
Improved liquidity and increasing market breadth: Looking ahead to 2026, expected interest rate cuts and possible monetary easing (quantitative easing), particularly in the USA, could improve liquidity on the markets. Small caps, real estate and interest rate-sensitive sectors, among others, could also benefit from this.
Value stocks and sector rotation: There is a chance that value stocks and undervalued sectors such as consumer staples, healthcare and energy could perform better in the coming year, especially if the economy develops moderately and interest rates continue to fall.
Selected emerging markets offer opportunities: Emerging markets such as China, Mexico and certain countries in Latin America remain selectively rich in opportunities. A weaker US dollar in the medium term, possible US interest rate cuts and renewed quantitative easing measures could provide additional impetus for emerging markets.
Possible upturn in the construction and real estate sector: The earnings performance of companies in the construction and infrastructure sector, such as in the cement sector, is likely to remain solid in 2026. A slight upturn in the stagnating real estate market is conceivable, which could benefit companies with residential or commercial real estate exposure.
Precious metals as a strategic addition: Gold is still considered an interesting building block for portfolio stability. The currently rather low positioning of many investors suggests further potential. Due to the structural supply deficit and demand from the renewable energy sector, silver also remains interesting. In this context, mining stocks are also in focus.
Risks that we are monitoring:
Interest rate situation in Japan: rising interest rates in Japan are placing a significant burden on the national budget and could lead to uncertainty and distortions. A possible end to the carry trade due to an interest rate hike in Japan and an appreciation of the yen could lead to sell-offs in tech and risk stocks, especially in the NASDAQ environment, and weigh on global liquidity.
More volatile labor markets: The labor market in the US is showing a weakening trend. In 2026 and 2027, there are likely to be more layoffs in the US, but also in other major economies. Increasing automation and the use of AI could lead to significant job losses, especially among well-trained workers and in certain sectors such as insurance, consulting and the film industry. This poses risks for consumption, social stability and the economy, but also supports further interest rate cuts.
High capital requirements of the economy and IPO liquidity risk: Not least the massive investments in the US technology sector are leading to high capital requirements, which means less capital is available for the capital markets. In the course of 2026, planned large IPOs, such as OpenAI or Anthropic, could drain liquidity from the market and lead to a more difficult stock market phase from the second half of the year.
Interest rate-sensitive stocks: The environment for banks and insurance companies could deteriorate in 2026, particularly with regard to interest margins and profitability, if interest rates continue to fall.
High valuations and lack of market breadth: The overall market in the USA is comparatively highly valued, but the actual market breadth is still low. Only a few stocks concentrate a lot of weighting and performance on themselves. If this remains the case, the susceptibility to corrections will increase.
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