AI bubble and sharp rate cuts: Deutsche names investors' fears in 2026

Deutsche Bank's annual survey shows that investors are entering 2026 with a clear set of prioritized risks: fears of a bubble in AI and technology companies are at the top of the list, while scenarios that have previously shaken markets are hardly alarming this time around.

The annual survey of Deutsche Bank showed that investors consider the possible formation of a bubble in the segment of AI and technology companies to be the biggest risk for the markets in 2026, MarketWatch writes. More than 50% of the 440 asset managers surveyed named this scenario as the main one - with a noticeable lead over all other threats.

"The risk of a bubble in AI and technology rises above all other [concerns]," said Deutsche Bank's head of global economics and case studies, Jim Reid. Moreover, as Reid notes, "we have never had such a clear leader in the ranking of key risks for the year ahead."

Reed also points out that despite the heightened perception of bubble risk, it remains below the scale of market overheating seen in 2021, a period of post-pandemic excess liquidity when asset valuations rose almost universally.

In second place were two factors with a comparable share of votes: fears that the new Fed chairman may go for aggressive rate cuts, provoking market instability, as well as the risk of an emerging crisis in the private capital market, writes MarketWatch.

Next are macroeconomic threats: higher than expected bond yields - cited as a risk by 21% of respondents - and unexpected rate hikes by central banks due to persistently high inflation. Concerns about these risks were expressed by 15% of survey participants. Deutsche Bank notes that these two items largely reflect the same risk, which together look even more significant for markets.

Among the scenarios that investors don't consider a serious threat, although they have been realized in the recent past and shook financial markets badly at the time, are a global pandemic (none voted for it), a dangerous escalation of tensions in the Middle East (1%), a global trade war (3%), Taiwan becoming a global flashpoint (only 5%), and a major political or financial crisis in France, MarketWatch notes.

Amid a cautious attitude toward tech company valuations, 71% of respondents said they favor U.S. market stocks outside of the Magnificent Seven, the seven largest U.S. technology companies, when building retirement portfolios, MarketWatch writes. That figure has remained unchanged since July 2024, even though Mag7 securities have outperformed the broad market by about 9 percentage points over that period.

Another notable finding of the survey was the accelerating adoption of artificial intelligence. While in the summer of 2024 only about half of respondents used AI for work purposes, this figure has now risen to 86%. According to Reed, the rate of AI adoption in Europe is even higher than in the US.

In terms of stock market expectations, investors give a subdued outlook for the S&P 500 index for 2026, with an average expected return of 6.9% versus the roughly 15% already shown by the broad U.S. market in 2025. That said, even this forecast is the most optimistic in the past four years in this survey, the publication concludes.

This article was AI-translated and verified by a human editor