“Rational Exuberance” Sets the Tone for 2026

DWS CIO Vincenzo Vedda’s Q4 2025 outlook argues that resilient growth, moderating inflation and rate cuts create a constructive backdrop for risk assets in 2026 

• Three Fed rate cuts, supportive ECB policy and easing inflation underpin expectations for stronger earnings growth, with the S&P 500 seen near 7,500 by end-2026.

• Bonds offer positive real carry, though rising government debt pressures ultra-long yields; IG spreads look tight, high yield warrants caution.

• AI remains a structural driver but faces higher dispersion risk; gold is favoured as a portfolio hedge.

Can optimism persist if AI expectations reset or fiscal strains intensify? The full CIO View details cross-asset implications.