Opportunities and risks in 2026
Table of Contents
From a macroeconomic perspective, 2026 will be marked by a new normal following the interest rate turnaround and Donald Trump’s return to the White House in early 2025. The combination of a sustained AI investment boom, global key interest rate cuts, and a significantly more expansionary fiscal policy-especially in Europe-will lay the foundation for a stable, albeit moderate, upturn in the global economy.
Simultaneously occurring, vulnerabilities in the financial system are increasing: rapidly growing private debt markets, high government debt, and highly concentrated valuations in the US stock market.
AI boom still has potential in 2026
The moast important structural growth driver in 2026 will remain the AI boom.Large US technology companies continue to invest heavily in data centers, semiconductors, software infrastructure, and telecommunications and data networks. The planned capital expenditure of the major platform companies – such as Amazon, Alphabet, Microsoft, Meta, and Oracle – will rise to over US$400 billion in 2026. It is striking that although these sums seem remarkable, the average investment ratio in relation to GDP is still below the past extremes of previous investment waves such as railways, electrification, or digitization. the investment boom is thus well advanced,but by no means exhausted.
In the baseline scenario, the AI boom remains intact. Investments continue to rise without reaching excessive levels. The large technology companies will continue to generate high positive free cash flows in 2026, remaining relatively autonomous of turbulence on the capital markets. the macroeconomic growth impulses outweigh the financial risks. The momentum in the AI sector thus acts more as a growth engine than as an immediate systemic risk – provided that profit expectations remain within a realistic range.
USA: Major tech companies plan to significantly increase investment spending in 2026
Capital expenditure in USD billions (consensus estimates for 2025 and 2026)
Sources: FactSet, goldman Sachs, Metzler
Free Cash flow 2026
| Oracle | Microsoft | Meta | Amazon | |
|---|---|---|---|---|
| -10 | 60 | 70 | 40 | 100 |
Looming Risks in 2026: Private Debt, Sovereign Debt, and Inflation/Deflation
The global economic landscape heading into 2026 is fraught with potential risks, spanning the private debt market, sovereign debt levels, and the uncertain trajectory of inflation. These interconnected vulnerabilities could trigger notable financial instability.
Risks in 2026: Private Debt
The rapid expansion of private debt markets, particularly illiquid portfolios, presents a significant systemic risk. A downturn could lead to widespread wriet-offs and defaults, eroding investor confidence and stifling credit flows. US life insurers’ reliance on special purpose vehicles and structured debt instruments like fabns – used to outsource risks with limited regulatory oversight – mirrors pre-2008 conditions. Defaults within these private debt vehicles could negatively impact insurer balance sheets,potentially triggering a regulatory response and forcing insurers to reduce exposures,disrupting refinancing chains in the real economy.
Risks in 2026: Sovereign Debt
Sovereign debt in developed economies has reached levels not seen since the Napoleonic Wars. Critically, most countries continue to operate with primary deficits, shifting vulnerability from the private to the public sector. Rising interest burdens are limiting fiscal flexibility while political pressures mount for increased spending. Financial markets are beginning to recalibrate risk premiums, with potential consequences for government bond markets and long-term interest rates.
Risks in 2026: Inflation or Deflation
Both deflationary and inflationary scenarios are plausible,though inflation risks currently predominate.
Deflation could arise from a break in the private credit cycle, triggered by problems in private debt, leveraged loans, or high yield markets. Defaults would reduce the money supply and lead to lending caution, cooling the economy. Though,the current size of these markets (around USD 4.0 trillion) is smaller than the pre-crisis US mortgage market (USD 10 trillion), limiting the risk of systemic deflation.
The risks of inflation are more serious. in the US, high deficits and rising government debt coincide with potential interest rate cuts that could push rates below the inflation rate. The US may struggle to sustain high real interest rates while simultaneously increasing debt to cover growing expenses.
## Government and Corporate Bonds, Stocks: An Outlook
The interpretation is obvious: above a certain stress level, market participants no longer fear only valuation adjustments on the stock markets, but also the real economic consequences of a possible recession. In such a scenario, the US unemployment rate could rise from its current level of around 4.4 percent to between 6.0 and 8.0 percent. Falling tax revenues and rising social spending would quickly push the government deficit to between 12 and 15 percent of GDP – levels reminiscent of Greece in 2010.
for government bonds,this means limited price potential for long-term maturities combined with increased extreme risks – especially in scenarios where government bond markets are pricing in significantly higher risk premiums.
Corporate bonds
The corporate bond market in the eurozone is showing a pronounced appetite for risk. spreads between BBB issuers and A issuers are at historically low levels. The market is thus pricing in a very favorable scenario in which default rates remain moderate in the long term.
However, if tensions arise in private debt and leveraged loans at the same time, this optimism could quickly turn sour. In such an habitat, a significant spread widening would be expected for high-yield bonds and lower investment-grade securities. Investors would once again differentiate more strongly between credit ratings and demand quality in a more targeted manner.
Against this backdrop, the A-rated corporate bond segment appears particularly interesting. It offers an attractive yield premium over government bonds without the high vulnerabilities of the riskier market segments.
Europe: Corporate bond market prices in an optimistic scenario
Yield difference between non-financial corporate bonds in EUR with a rating of BBB vs. A
Sources: Bloomberg, Metzler; as of October 31, 2025
Stocks: AI concentration in the US, opportunities in Europe
On the stock markets, the AI boom is not only making headlines, but is now also shaping the market structure. A basket of around 40 AI-related stocks – ranging from large platform companies and semiconductor manufacturers to infrastructure and capital goods groups – now accounts for almost half of the market capitalization of the S&P 500. Investing in the US stock market has thus effectively become a bet on the success or failure of AI, with traditional diversification across sectors taking a back seat.
There is also a valuation aspect to consider. an analysis of the MSCI USA excluding seven large technology companies shows that the earnings performance of the remaining US
Metzler Asset Management Forecasts Moderate Growth & Risk Management for 2026
Published: December 27, 2025
Metzler Asset Management has released its outlook for 2026, predicting a year of moderate growth and a continued, albeit slower, cycle of interest rate cuts in the US. The firm emphasizes the importance of actively managed risk allocation and broad diversification in a landscape potentially vulnerable to economic headwinds. Their analysis outlines a base case scenario of continued growth alongside a significant (30%) probability of a negative scenario involving potential asset bubbles and rising government debt costs.
Base Case Scenario: Moderate Growth & Continued Rate Cuts
Metzler’s base case scenario anticipates continued economic growth, driven by a resilient labor market and easing inflationary pressures. They predict the US Federal Reserve will continue to implement interest rate cuts, though at a more moderate pace than previously seen. This aligns with recent commentary from the Federal Reserve, which has signaled a data-dependent approach to monetary policy, aiming to balance economic growth with maintaining price stability. https://www.federalreserve.gov/
Potential Risks: The Negative Scenario (30% Probability)
However, Metzler highlights a substantial 30% probability of a negative scenario. This scenario centers around two key risks:
* AI Bubble Burst: A correction in the rapidly expanding artificial intelligence (AI) sector could significantly dampen investment and consumer spending. While AI continues to show promise,concerns about valuations and the pace of adoption remain. https://www.reuters.com/technology/
* Private Debt Sector Concerns: A loss of confidence in the private debt market – lending outside of traditional banks – could constrict credit availability, impacting both investment and consumption. The growth of private credit has been a recent trend, and increased scrutiny from regulators is anticipated. https://www.imf.org/en/Topics/Financial-Stability/Private-Debt
Moreover, the report warns of a potential resurgence in concerns surrounding government debt. If markets demand higher risk premiums on government bonds – reflecting increased perceived risk – financing costs could rise substantially, potentially hindering economic growth. The US national debt currently stands at over $34 trillion,and ongoing debates about fiscal policy contribute to market uncertainty.https://www.usdebtclock.org/
Investment Strategy for 2026: Quality, Diversification & Risk Management
Given these potential risks, Metzler advises investors to prioritize a strategy of consciously managed risk allocation. Key recommendations include:
* Broad Diversification: Maintaining a well-diversified portfolio across asset classes is paramount.
* European Equities: Focus on European equities, particularly those with attractive valuations. European markets have generally lagged behind US markets in recent years, potentially offering value. https://www.marketwatch.com/investing/stock-market
* Investment-Grade Corporate Bonds: Prioritize solid corporate bonds in the A range, indicating lower credit risk.
* Caution with High-Risk Assets: Metzler advises caution regarding:
* Highly hyped AI Stocks: Avoid overexposure to individual AI stocks driven by speculation.
* Concentrated US Stock Indices: Reduce reliance on US stock indices that are heavily weighted towards a small number of large companies.
* Long-Term Government Bonds (High Duration): Be wary of long-duration government bonds, which are more sensitive to interest rate changes.
Metzler Asset Management views 2026 as a year where proactive risk management will be crucial for investment success. The firm believes opportunities exist, but they will be best captured by investors who prioritize quality, diversification, and a cautious approach to potentially volatile market segments.
Disclaimer: This document published by Metzler Asset Management gmbh [together with its affiliated companies as defined in section 15 et seq. of the german Public Limited Companies act (Aktiengesetz – “AktG”), jointly referred to hereinafter as “Metzler”] contains facts obtained from public sources which Metzler deems to be reliable. However, Metzler cannot guarantee the accuracy or completeness of such information. Metzler reserves the right to make changes to the opinions, projections, estimates and forecasts given in this document without notice and shall have no obligation to update this document or inform the recipient in any other way if any of the statements contained herein should be altered or prove incorrect, incomplete or misleading.
neither this document nor any part thereof may be copied, reproduced or distributed without Metzler’s prior written consent. By accepting this document, the recipient declares his/her agreement with the above conditions.
Keep reading