Alternative investments are no longer just an option but a “necessity” for building a robust portfolio, according to Deutsche Bank.
The bank’s Capital Markets Outlook points to compelling opportunities in alternatives such as private equity, infrastructure and private credit in 2026.
The bank emphasises that these investments come with higher and often less predictable risks – but their primary role is to diversify and stabilise the broader investment strategy.
“Alternative investments are less about maximising returns and more about intelligently managing overall risk,” Germany’s chief investment officer Ulrich Stephan said.
“The private credit sector, i.e., direct lending to companies, has grown strongly due to increased interest rates and can offer inflation protection through variable interest rates, but also carries default risks,” the report said.
According to the bank’s experts, in a complex environment, active risk management and selective investing beyond traditional asset classes will be essential for a stable and resilient asset allocation.
Active risk management and targeted diversification outside traditional asset classes will be crucial for a stable and robust allocation in 2026, Deutsche Bank says.
Global chief investment officer Christian Nolting maintains a fundamentally constructive market outlook while underscoring rising risks.
“For 2026, we expect an overall robust development of the global economy.. Nevertheless, the multitude of existing and potential crises and conflicts remains a challenge for investors,” he said.
“Long-term investment success is based on discipline, active risk management and the willingness to seize opportunities across different asset classes.”
Nolting highlights artificial intelligence (AI) as a continued key growth driver, with significant investments led by the United States and China.
“AI is a game-changer and will remain a structural growth theme in 2026,” Nolting explained.
At the same time, he urges restraint over AI exposure: “Overinvestment and electricity shortages could dampen expectations.”
Morningstar has previously discussed how investors may be more exposed to AI than they realise due to the high concentration of technology stocks in the US index.
Deutsche Bank believes industrial companies supporting the AI supply chain – including construction and energy suppliers – also stand to benefit from the AI boom in 2026.
“AI is a game-changer and will remain a structural growth theme in 2026,” Nolting said.
The report notes that the structural transformation driven by AI will likely cement itself as a core growth engine, offering investors a broad spectrum of opportunities.
While “Big Tech” is expected to continue strengthening, the bank says rising demand for data centres and soaring electricity needs will allow other regions and sectors to gain ground.
“Investments in infrastructure such as energy or data centres, however, promise stable returns, supported by long-term contracts and a high global investment need,” the report said.
Equity markets overall are expected to broaden in 2026, according to Stephan.
“We expect solid double-digit earnings growth for most regions, spread across more sectors than in previous years… banks should also perform well due to high capital market activity and a stable interest rate environment,” he said.
As additions beyond core holdings, sectors such as pharmaceuticals and luxury goods may regain prominence, supported by easing trade headwinds and improving demand.
Small and mid-cap stocks could also become more attractive as they benefit from lower interest rates and strong domestic orientation, Deutsche Bank adds.
Deutsche Bank raises gold forecast to US$4,500
Deutsche Bank has increased its year-end 2026 gold price forecast to US$4500 per ounce.
“Strong demand from central banks and from investors seeking a hedge for their technology investments is likely to support the gold price in 2026,” Stephan said.
In the oil market, he expects prices to stay low amid an anticipated global oversupply.
Stephan also underscored the strategic importance of rare earth elements, vital for technologies such as AI and electromobility.
“The race for access to these critical minerals and the search for substitutes will intensify. This offers long-term opportunities for specialised companies.”
US dollar to stabilise
After a sharp depreciation in early 2025, Stephan expects the US dollar to stabilise next year.
“A strong US equity market, driven by AI investments and fiscal stimulus, is likely to ensure corresponding capital inflows into the dollar.”
While expected Fed rate cuts and high US government debt will pose headwinds, he says the positive and negative factors should largely offset one another, pointing to stable EUR–USD developments overall.
According to Morningstar’s 2026 Global Outlook Report, the US dollar is “not quite” attractive again.
Morningstar notes that dollar exposure can grow large in portfolios with heavy equity allocations due to the dominance of US stocks – and managing this exposure requires balancing hedging costs with diversification benefits.
Morningstar believes the greenback is entering a prolonged phase of cyclical weakness, though not a secular decline.
“While the dollar’s recent decline has been pronounced, the evidence doesn’t point to a full-blown structural collapse.”
The report attributes much of the 2025 weakness to cyclical and policy-driven forces, including slowing US growth, narrowing rate differentials, persistent fiscal deficits and elevated inflation.
“External factors such as shifting global capital flows, renewed hedging of dollar assets, and waning confidence in US macroeconomic policy have also added pressure.”
Despite headlines about the dollar’s sharp decline, Morningstar says a historical lens shows the currency remains elevated.
“Among the 34 major developed and emerging market currencies we track, only nine are currently more overvalued than the US dollar – suggesting that, while cheaper, the greenback is far from ‘cheap’’.”
Even with recent weakness, Morningstar argues the dollar’s global dominance is far from over.
“For investors, this shift should be seen as an opportunity: a reminder that global diversification may play a more important role in portfolio returns going forward than it has in the recent past, as currency and regional exposures once again become meaningful sources of value.”
Rise of private markets “impossible to ignore”
“The next frontier in investing isn’t a new asset class – it’s a new way of giving people access,” according to Morningstar’s outlook.
As public company numbers shrink and private markets expand, investors and advisers are increasingly exploring how to integrate private equity, private credit, private real estate and infrastructure into portfolios.
“Adding private assets to a portfolio can help restore balance,” the firm says.
Once reserved for institutions and wealthy investors, private-market access is now expanding rapidly.
“Semiliquid (or evergreen) funds-including interval funds, tender-offer funds, nontraded business-development companies, and nontraded REITs-offer perpetual access to private assets with periodic redemptions. Assets in semiliquid funds totalled almost US$450 billion through June 2025, up 16% from 2024 and 77 per cent since 2022,” Morningstar said.
“As capital markets evolve, the same principles apply across all investor types: prudence, diversification, and transparency.”
