Julius Baer CEO warns AI bubble tops market risks

Julius Baer CEO Stefan Bollinger said an AI bubble is the biggest global market risk, while wealthy Indians lifted offshore investments to 15-20% from 2-5% over five years, in a Nov. 2 Economic Times interview.

Bollinger told the Economic Times that India’s equity valuation correction to 16-16.5 times earnings from 21-22 times is healthy, keeping the country’s growth story intact. At the midpoint, that valuation range is about 24% lower, according to Atlas360 calculations.

The comments frame how a major Swiss private bank is reading market risks: less as a conventional banking problem and more as a valuation and financing issue around artificial intelligence.

“The risk of the next crisis stemming from a banking crisis is incredibly low. Banks are very safe,” Bollinger said in the interview. “I think it's more likely that this is going to be through some off-balance sheet commitment that you see now in the AI ecosystem where the numbers that you talk about are just high.”

Off-balance sheet commitments are contingent exposures that do not appear as standard assets or liabilities. Bollinger did not identify specific companies, instruments or amounts tied to the AI ecosystem in the interview.

On Indian private wealth, Bollinger said global diversification has increased over the past five years. He said portfolios are built around each client’s risk appetite, spending needs and investment horizon, with offshore allocations now at 15-20% of wealth.

The shift is material in scale: the current 15-20% range is at least three times the prior 2-5% range when comparing the bottom of today’s range with the top of the earlier range.

He said wealthy clients looking beyond the U.S. are again considering hedge funds, while Julius Baer is focused in private equity on managers able to reach specific industries or markets. Private credit, direct lending outside public bond markets, remains interesting, he said.

Clients are also using structured products, securities whose payoffs are designed around a market outcome, Bollinger said in the interview. He said those products can provide downside protection or magnified gains, depending on the structure.

Bollinger also addressed monetary policy, saying two Federal Reserve members supported higher rates while the rest did not. “Just before the midterm (elections in the US), raising rates would have caused a lot of tension,” he said.

He said high inflation complicates the Fed’s decision, and referred to December as “a fully priced thing,” without giving a specific policy forecast. The interview did not provide a precise December meeting date.

Asked whether rising yields could create isolated problems at pension funds, insurers or other companies, Bollinger said that was possible but not systemic in his view. He said rising rates in Japan are making domestic markets more attractive and prompting Japanese investors to reassess overseas allocations.

December rate test

In December 2026, the checkable event is the Federal Reserve’s rate decision, including whether policymakers raise rates after Bollinger said two members favoured an increase and the rest did not.

The same December decision will show whether the Fed’s published vote split changes from the division Bollinger described in the interview.

Investors can also compare the Fed’s December language on inflation with Bollinger’s comment that inflation is “really high,” once the central bank releases its decision statement.