DBS flags 3 top risks to global markets in 2026; US tech correction looms

The global economy is closing 2025 on a stronger footing than many had anticipated, DBS economists Taimur Baig and Chua Han Teng said, in a note dated December 8, 2025.

 

While the 2026 outlook remains broadly constructive, DBS economists have highlighted three key risks that could disrupt markets worldwide.

 

The good news, they said, is that inflation and interest rates are expected to remain manageable across most economies, with only the US facing potential pressures. Global trade has also demonstrated resilience, defying fears that ongoing geoeconomic volatility would derail exports. South and South-East Asian economies, in particular, are on track to post considerable export growth in 2025 compared with 2024, benefiting from demand both in the US and elsewhere. China and the US, the central actors in trade tensions, are also seeing growth rates exceed earlier forecasts.

 

Despite these positive trends, DBS identifies three major risks that could unsettle the global markets in 2026.  ALSO READ | Market forecast 2026: UBS, Franklin Templeton AMC, Emkay, others decode

A major US stock market correction

 

According to DBS, the first risk is a sharp correction in US equities, particularly in tech stocks linked to the AI investment wave. If earnings growth slows among leading AI-tech companies or if new US-developed AI models fail to outperform cheaper alternatives from China, the market could face a reckoning. Hundreds of billions invested in AI infrastructure may be deemed excessive, prompting a re-rating of valuations across the AI-investment complex. 

 

Given the heavy weighting of US tech companies in global indices, such a correction could have global reverberations. Asset managers’ balance sheets could be hit, investment and lending sentiment could weaken, and consumer confidence worldwide may be affected. 

 

While not necessarily triggering a crisis on the scale of 2008, this scenario could see US growth fall below 1 per cent, disrupt credit spreads for AI-related firms, and majorly impact electronics exports, particularly semiconductors and servers.

Global bond market selloff

 

The second risk involves a potential selloff in global bond markets, DBS said. Industrial economies are burdened with record debt, while interest rates remain elevated in Japan. In the US, persistent inflation, limited progress on fiscal consolidation, and concerns over Fed independence could create interest rate volatility and yield curve inversions. Such developments would likely have knock-on effects for the broader global economy, echoing some of the financial disruptions seen in equity markets.   ALSO READ | InCred Wealth's 2026 game plan: Staggered bets on equities, metals

Escalating geoeconomic tensions

 

Lastly, DBS points to the ever-present risk of worsening geoeconomic tensions. Flashpoints exist across Latin America, Europe, the Middle East, and Asia. Even recent trade “deals” may not ensure a stable environment in 2026. 

 

These risks, DBS caution, are likely to persist and could challenge the otherwise constructive outlook for global markets.

 

That said, while the global economy enters 2026 on a stable trajectory with supportive inflation and trade trends, investors and policymakers should remain vigilant. A US stock correction, bond market volatility, or renewed geoeconomic tensions could all undermine the positive momentum and reshape the global financial landscape. 

  Disclaimer: The outlook has been suggested by DBS. Views expressed are their own.