Deutsche Bank

Deutsche Bank Capital Markets Outlook 2015: USA leads, Europe stagnates

Deutsche Bank expects a gradual recovery in the global economy. The Bank announced in its Capital Markets Outlook 2015 presented in Frankfurt today that experts expect global economic growth to be 3.6 percent in 2015.

According to Stefan Schneider, Deutsche Bank Chief German Economist, this is mainly due to the rapidly growing economy in the USA. However, Schneider sees Europe falling back: "The reform backlog in some countries and the lack of investment only make growth of 0.8 percent possible in Europe next year, despite the ECB increasing its expansionary monetary policy. In the area of fiscal and reform policy, tensions are expected to increase again, if no sustainable structural progress is made." Deutsche Bank also expects growth of 0.8 percent for Germany next year.

According to the Bank, US equities as well as Asian emerging market stocks will benefit from the expected global economic recovery and stable corporate earnings. Dr. Ulrich Stephan, Chief Investment Officer for Deutsche Bank's 28 million private and business clients, is convinced that DAX companies' market prices will also increase in 2015. Stephan: "By the end of 2015, we see the DAX at 11,500 points. In addition to global economic growth, the reason for this is also the further depreciating euro against the US dollar." According to Deutsche Bank, some equities from Europe therefore also provide potential. The Bank even considers parity between the US dollar and the euro as possible in the course of the next few years.

In an environment of low interest rates, equities seem interesting for promising and long-term investment. According to the experts, there is hardly any positive return possible without a risk in the foreseeable future. The Bank recommends a strategy with an allocation across asset classes, regions and currency areas. This also includes first-class office and retail real estate, which is expected to continue benefiting from the global economic environment. Gold, however, seems uninteresting as an investment in 2015 according to the Bank.


In Deutsche Bank's view, the growth momentum, monetary policy and stock markets in the USA, Europe and Asia will initially further diverge in 2015. Nevertheless, the Bank considers the global economic recovery as intact, though the most important regions in the global economy have shown mixed data in the past few months. The experts expect the ECB to also include government bonds in its securities purchase programme in spring. As a consequence, the economic policy debate in Europe should move towards fiscal and reform policy and result in increasing volatility on markets. Due to very robust US economic performance, the Bank expects the global economy to grow more than in the previous period, but the pace of growth is still lagging behind the long-term average. "I expect global economic growth of 3.6 percent in 2015", said Stefan Schneider, Chief German Economist at Deutsche Bank, when presenting the Capital Markets Outlook 2015 in Frankfurt.

US economy on track

According to Dr. Ulrich Stephan, Chief Investment Officer for Deutsche Bank's 28 million private and business clients, economic data from the USA is very encouraging. Stephan: "The US upswing is self-supporting. This is a good sign for the global economy." Stephan expects growth of 3.5 percent in the USA next year. One reason for this is the recovery on the US labour market: by the end of 2015, the unemployment rate is expected to decrease towards 5 percent. The low-priced domestic shale oil provides an additional lubricant for the US economy. Furthermore, companies did their homework. "Corporate earnings have increased significantly and are growing robustly", said Stephan. According to Deutsche Bank, this is decisive for future price potential on stock markets. "I continue to focus on the USA", confirmed Stephan.

China: "Rising dragon"

China is changing from an investment-driven and export-oriented nation towards a consumer-oriented domestic economy. Structural reforms have had an effect and the new China is opening up. According to Deutsche Bank, more liberalisation is good for the country. Chinese growth will presumably slow slightly in 2015, but on a very high level. "I expect stable, healthy growth of 7 percent", said Stephan. The strategist thinks the main reason for slower economic growth is an economic policy that does no longer exclusively focus on expansion but increasingly on sustainability.

Europe will also lag behind in 2015

Deutsche Bank's picture for Europe is different. Here, urgently required reforms are stagnating, investment is lagging behind announcements and growth is far too weak. "Europe is at risk of further losing ground in the competition – not only compared to the USA but also compared to Asia", said Chief Economist Schneider. It is still being relied too much on fiscal and monetary policy to solve problems. According to Schneider, the long-term growth trend can only be improved by extensive structural reforms. Expectations that the ECB can boost the economy in Europe are therefore expected to be disappointing: "If reforms continue to be implemented at a snail's pace, especially in France and Italy, I expect growth of only 0.8 percent in 2015", said Schneider. The German economy is also not expected to grow by more than 0.8 percent in 2015. According to Schneider, not only geopolitical crises but also the effects of minimum wages and pension packages in Germany will have a negative impact on economic growth next year.

Capital markets:

In central banks' crossfire
When it comes to monetary policy, Deutsche Bank strategists think 2015 will be the year of two paths: While the US Federal Reserve and the Bank of England are expected to already increase key interest rates in summer, Japan and the eurozone might initiate further unconventional measures to extend their monetary policy. "I expect the US Fed to be very cautious and only increase the key interest rate if it does not have to fear a sustainable slowdown in the economy", said Chief Investment Officer Stephan.

Since the middle of 2014, the US dollar has already appreciated significantly against the important currencies in the world. "2014 was only the beginning. The appreciation of the dollar is expected to continue", said Stephan. One reason is increasing capital flows in US bonds and equities from the low interest rate regions Europe and Japan. By the end of 2015, the greenback might be at 1.15 US dollars per euro. In the medium term, Deutsche Bank even considers parity between the euro and the US dollar as possible.

According to Stephan, US equities are no longer a bargain, but they should still be part of the portfolio, especially due to their low-fluctuation performance resulting from very solid growth prospects and stable corporate earnings. Asian emerging markets will also be among the high-growth regions again in 2015. In addition, Deutsche Bank also sees DAX stocks benefiting from the depreciating euro and increasing global economic growth.

Asset classes:

Bonds: Currently hardly any opportunities on the doorstep
Bonds have given a positive surprise in 2014. Stephan does not expect this to be repeated next year. Even though the yields for 10-year Bunds are slightly increasing they should remain low overall. On the hunt for higher yields on the bond market, investors should therefore widen their horizon. "Opportunities on the bond market should not be searched for on the doorstep", explained Stephan. A way out of the low interest rate dilemma can be found in US corporate bonds with a good credit rating. For investors with a higher risk propensity, however, emerging market bonds in local currencies with a yield of around 6.5 percent are much more interesting.

Equities: Essential but volatile

"Equities are essential for successful investment", emphasized Stephan. Investors should not be put off by the current roller coaster ride on stock markets even though volatility might even increase in 2015. Despite all the adversity, many companies are doing very well. While earnings in US and German companies have reached record levels, particularly European stocks are still below the earnings trend. Stephan: "Europe has potential for surprise in 2015 – but to the upside and downside. US equities therefore remain the first choice for me."

Europe: Promising cyclicals

Deutsche Bank believes that economically sensitive stocks will perform better in Europe than defensive stocks. Such cyclical stocks win due to increasing global economic growth, a weak euro and positive earnings expectations. The experts recommend European stocks from the automotive, construction, chemicals, media and financials sectors. On the other hand, they advise against utilities and pharmaceutical companies. The DAX is also expected to benefit from an increasing global economy due to its cyclically sensitive nature. Stephan expects high one-digit earnings growth in German companies and sees the German leading index at about 11,500 points by the end of 2015. On a regional level, the Spanish IBEX 35 is also interesting. Here, investors are participating in the positive effects of advancing structural reforms and the improvement in the export-oriented Spanish economy.

USA: Stable, with potential for surprises

The USA is currently experiencing the strongest growth phase since 2003. With new price records, the US stock market has also underpinned its leading position on the global stock market in the past few weeks. According to Deutsche Bank experts, the US market is further advanced in its cycle than Europe, but it remains a key element of asset investment. Overall, US equities are expected to perform on a stable path due to increasing consumption and a strong economy – and might provide positive surprises. The investment experts predict an index level of 2,150 points for the S&P 500. The appreciation of the US dollar expected by Deutsche Bank bears an additional performance opportunity. Opportunistic investors should focus on IT companies, pharmaceutical and financial stocks.

Asset allocation: Diversity is the key

When it comes to asset investment, the following also applies in 2015: Only those who are willing to take a risk can achieve positive real return in the continuous low interest rate environment. In the light of various geopolitical influences it is important to broadly diversify investment and keep a close eye on markets in 2015. This way investors can react flexibly and quickly to market movements. "It is becoming increasingly difficult to find the few pearls", explained Stephan. It is therefore recommendable to use an investment strategy with a diversification across asset classes, regions and currency areas as a basis for a sustainably promising portfolio. Chief Investment Officer Stephan considers an equity ratio of at least 50 percent at the beginning of the year as meaningful in a balanced securities portfolio. The allocation should be one third each in the USA, Europe and Asia, while Deutsche Bank prefers Japan as well as the emerging markets China, India and Indonesia. Stephan also recommends adding bonds to the portfolio. It is important that bond management is flexible. Investors should also focus on real estate and hold some liquidity.

Commodities: Gold has not been a winner of the crisis

2014 has not been a good year on commodity markets. According to Deutsche Bank, the return potential from commodities will also remain very limited next year. "We expect headwind across all commodity segments in 2015" said Stephan. "Prices are likely to fall further." Especially the strong US dollar has had a negative impact on all commodity segments. In November, the gold price has fallen to a four-year low – the price decline is threatening to continue. For 2015, Stephan therefore sees hardly any potential and predicts a price level of 1,150 US dollars. "Gold is expected to lose more attractiveness." Commodities are currently not being considered in Deutsche Bank's recommended asset allocation due to the overall rather moderate performance potential.

Real estate: Potential on a regional basis

Against the background of regionally different economic prospects for 2015, Deutsche Bank also expects heterogeneous performance on real estate markets. First-class office and retail real estate are an interesting investment opportunity as they are both expected to further benefit from the positive global economic environment on a global basis. "In the next five years, I expect an overall yield of 4.5 to 6.5 percent for office real estate in the big metropolises", said Stephan. The investment focus in this case is on properties with stable returns from long-term leasing in the USA, but also in selected locations in Europe and Asia. According to the investment strategist, it is worth looking at so-called secondary cities: "I expect the yield difference in Germany between prime locations and high-growth secondary cities to further decrease", said Stephan.

For further information please contact:

Deutsche Bank AG
Press & Media Relations

Markus Weik
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This press release contains forward-looking statements. Forward-looking statements are statements that are not historical facts. They also include statements on our assumptions and expectations. These statements are based on plans, estimates and forecasts currently available to the management of Deutsche Bank. Forward-looking statements therefore speak only as of the date they are made. We undertake no obligation to update publicly any of them in light of new information or future events.

By their very nature, forward-looking statements involve risks and uncertainties. A number of important factors could therefore cause actual results to differ materially from those contained in any forward-looking statement. Such factors include the conditions in the financial markets in Germany, in Europe, in the United States and elsewhere from which we derive a substantial portion of our revenues, potential defaults of borrowers or trading counterparties, the implementation of our management agenda, the reliability of our risk management policies, procedures and methods, and other risks referenced in our filings with the U.S. Securities and Exchange Commission (SEC). Such factors are described in detail in our SEC Form 20-F of 20 March 2012 under the heading "Risk Factors." This document is readily available upon request or can be downloaded from

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