Emerging market equities have delivered strong performance this year, with the MSCI Emerging Markets Index climbing approximately 15%. Despite significant gains since early 2025, Chinese stocks remain one of DWS's preferred choices in Asian markets. In contrast, the firm adopts a more cautious stance toward Indian equities, where valuations appear stretched even after historical outperformance.

DWS Global Chief Investment Officer Vincenzo Vedda anticipates further earnings downgrades in Q2, though technology and financial firms may prove resilient. Against this backdrop, DWS continues recommending highly diversified portfolios for investors. Eurozone participants should monitor dollar movements closely—greenback depreciation has nearly erased U.S. equity gains when converted to euros, leaving returns near zero.

While former U.S. President Trump pressures the Federal Reserve for rate cuts, DWS expects the Fed to maintain data-dependent caution. The European Central Bank has already taken initial easing steps, with euro strength potentially creating further room for additional cuts.

The S&P 500's robust rebound since January 2025 now approaches DWS's June 2026 target. However, after this sharp rally, correction risks loom larger—historically, summer months often bring subdued or negative market performance. European equities stay among DWS's favored allocations, retaining long-term upside potential fueled by fiscal support and returning international capital. Yet persistent headwinds—political shifts, tariff uncertainties, and escalating geopolitical tensions—demand vigilance.

The 10-year U.S. Treasury yield has edged up recently but remains well below early-2025 levels. DWS projects modest increases toward approximately 4.50% by June 2026. The dollar has depreciated roughly 13% against the euro year-to-date, showing persistent weakness after brief consolidation. Continued dollar softness appears likely, driven not only by America's substantial twin deficits but also by the current administration's explicit preference for a weaker currency policy.