2027 Annual Outlook: “The investment year 2027 will be more challenging than 2026”

FERI AG has published its 2027 annual outlook and believes that the coming investment year will be significantly more challenging overall than 2026. “In 2026, the continued AI boom was the primary factor driving a positive ‘risk-on’ environment in the markets. Doubts about what have now become very high earnings expectations, geopolitical risks, and high interest rates could challenge this ‘risk-on’ mode in 2027,” says Dr. Marcel V. Lähn, Chairman of the Executive Board, CEO, and CIO of FERI AG.

FERI views the AI boom as fundamentally positive and shares the general expectation of significant productivity gains across the broader economy as a result of the widespread adoption of AI applications. The hyperscalers’ substantial investments—totaling more than one trillion U.S. dollars by 2027—are therefore justified in principle. At the same time, according to Lähn, the likelihood is increasing that market participants will take a more critical look at the high profit expectations. While a significant correction is possible, FERI does not expect a crash like the one that followed the dot-com bubble.

On the geopolitical front, the Bad Homburg-based asset manager views the situation in the Middle East as particularly critical: there is a threat of renewed military escalation there. Energy prices are likely to remain high given the unresolved conflicts; there is a significant risk of oil prices rising sharply once again, leading to a surge in inflation with negative consequences for the global economy.

The demand for capital from hyperscalers and the substantial budget deficits of many countries point to persistently high interest rates. “A sustained decline in interest rates would require significantly negative economic stimuli—that is not our base-case scenario for 2027,” explains Lähn.

Diversification across asset classes and, above all, sectors is crucial

From FERI’s perspective, broad diversification remains crucial for investment success. Commodities benefit in the event of geopolitical shocks. Given the often positive correlation between stocks and bonds, volatility strategies are an important diversifying component of a portfolio. Hedge funds are highly attractive in an environment characterized by potentially significant market distortions and multidirectional trends in interest rates, currencies, and commodities. “Spreading investments across asset classes does not necessarily ensure that the underlying drivers of returns are sufficiently diversified. This makes targeted, risk-conscious selection within individual asset classes all the more important in 2027,” says Lähn.

This applies in particular to stocks. FERI expects earnings growth to remain robust, but anticipates a shift in favorites within the AI cycle: The high level of investment is likely to push the hyperscalers’ aggregate free cash flow significantly into negative territory. FERI sees relative strength in downstream sectors such as power grids, power generation, and cooling technology. “The early beneficiaries of AI are not necessarily the winners of tomorrow,” emphasizes Chief Investment Officer Lähn. Opportunities for alpha—that is, excess returns relative to the broader market—are offered by AI users, such as those in the pharmaceutical and biotechnology sectors, software, or financial services.

According to FERI, bonds are making a comeback as a source of yield and diversification amid high nominal interest rates, with corporate bonds of solid credit quality (investment grade) preferred over government bonds. Gold remains strategically attractive despite the headwinds from high interest rates. The volatility risk premium—the compensation for providing hedging—is currently considered the most attractive risk premium in a multi-asset comparison.

Risk Scenarios in Focus

Beyond the base scenario, investors should keep a close eye on several factors in 2027. These include the possibility that, as early as 2027, significant productivity gains resulting from AI applications will become evident across the broader economy, which would lead to a very positive investment environment. However, an abrupt end to the AI boom or a “Euro Debt Crisis 2.0” originating in France are also conceivable. “Monitoring bond spreads will be one of the most important topics in investment research in 2027,” explains Dr. Marcel V. Lähn, referring to the presidential elections in France in April 2027. Furthermore, a military escalation of the Taiwan conflict cannot be ruled out.

Explore our 2027 Annual Outlook interactively in our Scrolly, available in German.