DWS: AI to Continue Dominating Global Equity Markets, S&P 500 Could Reach 8,200 Points by End of June 2026
According to the Zhitong Finance app, Vincenzo Vedda, Global Chief Investment Officer at DWS, noted that the market is currently concerned about short-term inflationary pressures and economic growth. The recent oil price shock has pushed up prices and dampened consumption and investment, and this trend is expected to keep the macro environment challenging. Investors are also reassessing interest rate risks. The environment presents a divergence: on one hand, AI brings strong growth momentum; on the other hand, inflation and geopolitics exert negative pressure. Moreover, how the current difficult geopolitical situation will evolve remains highly uncertain.
Global equity market performance is expected to continue being dominated by the AI sector. As computing power and infrastructure investment continue to increase, this will support certain industries in achieving higher earnings growth than the overall market. At the same time, divergence between regions and sectors is increasing, with AI-related markets benefiting from structural growth, while other areas remain more dependent on macroeconomic factors.
Even though debates about overinvestment and potential bubbles persist, valuation levels in the technology sector will continue to be supported by strong earnings growth. Overall, the global equity market environment is expected to be positive, but the influence of structural themes may outweigh macroeconomic factors. In the U.S. market, the S&P 500 is expected to reach 8,200 points by the end of June 2027. U.S. stocks continue to be driven by the AI investment cycle, which both fuels earnings growth and influences capital allocation. Strong demand for computing power and increasing AI monetization capabilities provide support for valuations, while risks lie in potential overinvestment and the possibility of reassessing growth assumptions.
In the European market, the Stoxx Europe 600 index is expected to test 650 points by June 2027. European stocks continue to be constrained by moderate economic growth, rising inflation risks, and structural challenges, resulting in less momentum than U.S. stocks. Nevertheless, there are still sector opportunities, particularly in areas benefiting from structural themes such as the energy transition and certain industrial stocks, which still have investment value.
The MSCI Emerging Markets Index is expected to reach 1,870 points by June 2027. Currently, emerging markets remain divergent: some Asian countries are benefiting from structural growth, while other regions are constrained by energy dependence and exchange rate volatility. The relative attractiveness of emerging markets still depends on global risk appetite and the U.S. dollar trend. In tactical allocation, DWS has upgraded the emerging markets rating to positive, mainly due to strong AI-driven demand and limited supply, giving emerging market semiconductor companies strong pricing power. Given the high weight of semiconductors in the index, this supports the upgrade. The MSCI Japan Index has the potential to challenge 2,660 points by June 2027. Japanese stocks are currently benefiting from structural reforms and the gradual normalization of monetary policy, but remain sensitive to global capital flows and the yen's exchange rate.
In terms of sector allocation, DWS made two tactical adjustments in mid-May. First, it downgraded the healthcare sector, mainly because earnings growth in the sector has been disappointing this year, and political risks are rising as elections approach, making it harder to attract capital in the current AI-driven market. Additionally, due to high mortgage rates and weak earnings growth prospects, DWS also downgraded the real estate sector. Meanwhile, DWS upgraded the utilities sector to positive, as the massive electricity demand from AI data centers will support earnings growth.
Gold prices are expected to rise to $5,400 per ounce by June 2027. Gold's fundamentals are supported by the interplay of monetary policy, exchange rate trends, and structural demand. Against the backdrop of expected loose monetary policy in the U.S., which will weigh on the U.S. dollar, the overall environment remains favorable for non-yielding assets. In addition, continued central bank purchases provide support for demand; in the first quarter alone, central banks are estimated to have absorbed about 240 tons of gold, corresponding to an annualized demand of about 1,000 tons, similar to recent years. This structural demand has a stabilizing effect and enhances gold's resilience to short-term macroeconomic fluctuations. Furthermore, gold remains closely correlated with global liquidity and money supply trends. Uncertain inflation outlook, persistent geopolitical risks, and expectations of looser financial conditions all reinforce gold's role as a potential hedge. Overall, monetary easing, structural demand, and a weakening U.S. dollar will support gold prices and allow further upside.
Brent crude oil prices are expected to fall to $82 per barrel by June 2027. In the short term, oil price trends will continue to be influenced by geopolitical factors. DWS's forecast assumes that the Iran conflict will gradually de-escalate, including the normalization of shipping routes, especially the reopening of the Strait of Hormuz by the end of September. In terms of supply and demand, the oil market may initially experience a shortage, but as supply gradually increases, it will be enough to offset and even reverse the supply gap. New production capacity is expected to come mainly from OPEC and individual producers like the UAE, while the U.S. also has room to increase output. By mid-2027, the crude oil market is estimated to have an excess capacity of about 2 to 2.5 million barrels per day, which will put downward pressure on oil prices.
