Not just tech stocks! Deutsche Bank: DeepSeek will impact the Federal Reserve, the U.S. economy, and will be a long-term negative for the dollar
Deutsche Bank believes that in the long term, DeepSeek technology is expected to drive global economic growth while suppressing inflation, positively impacting the bond and stock markets. However, if this technology spreads more globally and weakens the unique advantages of the United States in the technology sector, the US dollar may face downward pressure. In the medium to short term, this technology is expected to trigger a series of policy adjustments from the Trump administration, such as fiscal easing
The impact of DeepSeek may extend far beyond technology stocks. Deutsche Bank believes that the Federal Reserve's policies, the U.S. economy, and even the dollar's trajectory may change as a result.
Deutsche Bank strategist George Saravelos stated in a recent report that, in the long term, the emergence of DeepSeek is seen as a "positive supply shock" for the global economy, as it brings broader artificial intelligence technology at lower costs, ultimately achieving faster productivity growth. Saravelos wrote:
From a macro perspective, this technology will drive economic growth while suppressing inflation, positively impacting the bond and stock markets.
However, if this technology spreads more globally and weakens the unique advantages of the U.S. in the tech sector, the dollar may face marginal downward pressure.
On Monday, the dollar initially reacted to DeepSeek by rising, but Saravelos indicated that in the long run, DeepSeek will ultimately have a negative impact on the dollar.
As for the medium to short term, Deutsche Bank compares the impact of DeepSeek to the bursting of the internet bubble in the early 2000s.
At that time, external shocks led to a significant decline in the valuations of U.S. tech stocks, triggering a reduction in capital spending that spread to the real economy, ultimately resulting in a mild recession in the U.S. The Federal Reserve then adopted a more dovish policy, leading to a rise in the bond market. The dollar initially reacted with a complex response due to risk aversion but ultimately weakened due to reduced inflows into the stock market and narrowing interest rate spreads.
Deutsche Bank further pointed out that in the context of the current new U.S. government, DeepSeek may trigger a series of policy adjustments, such as an increased likelihood of fiscal easing.