World+Outlook-2026 Anything but dull

24 November 2025Deutsche BankResearch Global Economics World Outlook Date 2026 promises to be anything but dull. Rapid AI investment and adoption will continue to dominate market sentiment. Given the pace of technological advancement, it is difficult to believe this won’t translate into meaningful productivity gains ahead. However, the ultimate winners and losers will depend on a complex interplay of evolving factors, many of which may not become apparent until after 2026. In the meantime, markets could swing sharply between boom-and-bust narratives. While our global economists and strategists remain broadly positive for 2026, expect no let-up in volatility. The 8,000 year-end S&P 500 target from our US equity strategist — our most optimistic analyst — is notable given his strong track record.Global growth in real terms is expected to mirror 2024 and 2025, but the sources of that growth are shifting. The United States is projected to re-accelerate as trade uncertainty fades, household incomes benefit from tax cuts, and growth broadens beyond AI-related capex. Germany, after years of stagnation, is positioned for one of the most meaningful rebounds among major economies thanks to newly unleashed fiscal stimulus. Europe ex-Germany should slow slightly off a strong 2025, but momentum is expected to firm through the year. China’s growth is set to moderate as “anti-involution” reforms reshape supply-side behaviour, while India continues its structural ascent — likely surpassing Japan as the world’s fourth-largest economy in 2026 and on track to become the third-largest by 2028.Inflation continues to normalise across major economies, though not fully back to pre-pandemic norms. As a result, central banks remain cautious: our economists expect the Fed to deliver only two further cuts before pausing, while the ECB is expected to stay on hold until a hike in mid-2027. Our rates strategists see upward pressure on yields as equilibrium rates rise and global term premia rebuild, with 10-year US Treasury yields projected to end 2026 at 4.45%.AI continues to shape market dynamics. Our equity strategists expect the earnings cycle to broaden beyond mega-cap tech, with S&P 500 EPS reaching $320 (+14%) and a year-end target of 8000. They also remain overweight Europe but underweight Japan. Credit spreads should widen modestly as the US cycle becomes more uneven — echoing the late-1990s divergence between equities and credit — while Emerging Markets enter 2026 from a position of strength. Meanwhile, our FX team expects the dollar’s multi-year bull market to continue fading, with EUR/USD forecast at 1.25 by year-end.Figure 1: List of ContributorsEconomicsOverviewStrategyMichael HsuehCrude OilSameer Goel & TeamEmerging MarketsThatte, Maximilian UleerBinky Chadha, Parag EquitiesKarthik NagalingamSteve Caprio, Cem Keltek, CreditBakerGeorge Saravelos, Tim FXRaskin, Ioannis SokosFrancis Yared, Matthew RatesKaushik DasIndiaYi XiongChinaKentaro KoyamaJapanSanjay