Rational Exuberance in a Late-Cycle Goldilocks Market

Authored by DWS’s CIO office, this quarterly edition sets out a cross-asset framework for navigating volatile markets while positioning for a still-supportive macro backdrop. 

• Despite sharp AI-driven rotations and policy uncertainty, the base case remains a Goldilocks scenario of steady growth, easing inflation, and accommodative monetary policy.

• Equities retain upside support from AI investment and fiscal stimulus, though elevated valuations demand selectivity and regional diversification.

• Bonds regain relevance through carry, while gold stands out as a hedge against fiscal deficits and de-globalisation.

How durable is rational exuberance as policy, valuations, and geopolitics converge into 2026?