As artificial intelligence (AI) continues to dominate investor attention, financial markets across the United States and Europe are navigating a landscape shaped by volatility, technological momentum and mounting geopolitical uncertainty. Assessing valuations, fund flows and sector prospects, Christopher Dembik, Senior Investment Strategy Adviser at Pictet AM, offers his outlook for the year ahead.
“For us, there is no bubble comparable to the internet boom or the 19th-century railway mania. The profitability of technology firms, the strength of their balance sheets and the scale of their available cash make all the difference,” Dembik explains.
Recent market volatility — reflected notably in the VIX — is, in his view, driven less by monetary policy and more by market structure, amplified participation from retail investors and the rise of leveraged ETFs. “Erratic market swings are not the result of interest-rate expectations. They stem primarily from hedge-fund positioning and retail flows,” he notes.
Fundamentals remain robust. The combined net margin of the S&P 500 reached 13.1% in Q3 2025, and earnings forecasts for 2026 remain firmly positive. Even the major technology giants — the so-called Magnificent Seven — are delivering year-on-year earnings growth of 28%. For Dembik, it is this structural profitability that sets today’s AI landscape apart from previous speculative episodes: “Massive investment in data centres is being financed largely through cashflow rather than debt, which significantly reduces systemic risk.”
The AI market continues to be dominated by the United States, with NVIDIA and Alphabet in leading positions. “The two players are competing for dominance in hardware and large language models, but demand is strong enough to sustain both,” says Dembik. China, meanwhile, is carving out its own niche in robotic AI, with Huawei acting as the key domestic competitor, supported by a strategically planned five-year semiconductor programme.
Beyond AI, several other themes remain under close observation: US regional banks, the US private-credit market and cryptocurrencies. “Crypto assets do not pose a systemic threat, but their growing integration within the financial sector could amplify volatility,” Dembik cautions.
From an allocation perspective, US technology stocks remain the preferred exposure, complemented by positions in US solar energy and gold. “Private-bank clients are turning to gold not primarily because of inflation or geopolitics, but for diversification and its inherently limited supply. We see potential for gold to reach US$4,500–5,000 per ounce,” he notes.
Ultimately, 2026 is set to be shaped by the continuing momentum of AI, heightened volatility driven by market flows, and ongoing geopolitical and financial flashpoints. Yet for Pictet AM, restraint and selectivity remain essential. “We invest on a multi-year horizon, prioritising the quality of business models and the strength of fundamentals over speculation,” Dembik concludes.
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