Last year wasn’t great for American stocks — Deutsche Bank says that may not change in 2026
The U.S. economy has been struggling for the past year, and the impact of President Trump's policies has been visible on shares of American firms. The stocks underperformed last year, and reports suggest that the trend could continue in 2026. Thanks to global events and a probe into the Federal Reserve Chair Jerome Powell, these stocks have been in a frenzy. This could lead to investors selling off more US stocks and diversifying their portfolio by investing that money in European or other foreign stocks.
Last year, the SPDR Portfolio Europe ETF gained 34%, versus 18% for the SPDR S&P 500 ETF Trust, according to a report in Market Watch. The report also stated that a team of strategists from Deutsche Bank, led by Maximilian Uleer, believes that while the U.S. economy should be powered by capital expenditure, it is one of the more volatile regions as far as investors are concerned.
With the President seemingly mulling military action in Greenland and Iran, the market is set for even more uncertainty in the coming days. As a result, investors may feel the need to sell US stocks. That is not the only reason why they may feel the need to do so. Rising interest rates, thanks to inflation and US deficit concerns, could also lead to several challenges for high-performing regions and sectors. The administration’s interference may also be worrying, as far as the Deutsche Bank team is concerned.
“Another risk is the growing number of announced market interventions by the U.S. administration. Just last week, interventions in credit card rates, mortgage rates, institutional real-estate investments, and on capital strategies of defense companies were announced,” it said. The team also spoke about other concerns they had regarding AI and how it could lead to short-term setbacks for investors.
“Lastly, we expect worries around AI capex monetization and ‘round tripping’ [circular financing concerns] as well as private credit concerns to resurface and fade throughout 2026. None of the risks seems imminent. But the sum of risks increases the chance for short-term setbacks in 2026,” it explained. More investors have sold US stocks of late when compared to their European counterparts, and that is not expected to change in 2026.
They also predicted 650 for the Stoxx Europe 600 by the end of 2026, a return of 7%, versus a 15% return forecast for the S&P 500. However, higher US growth will bring higher risks to investors. Deutsche Bank is not the only organisation that has come to this conclusion. As per the report, Morgan Stanley strategists also noticed a similar trend among investors to diversify into European stocks. This trend picked up in the new year and is seemingly going to continue.
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