Goldman Sachs expects global equities to deliver solid but slower gains in 2026, with total returns projected at around 11% over the next 12 months, including dividends and measured in US dollars. This outlook follows a strong rally in 2025 and is underpinned by continued earnings growth and steady economic expansion across regions.
The bank highlights that gains in 2026 will be driven mainly by fundamental profit growth rather than multiple expansion, marking a shift from last year’s valuation-led returns. While valuations reached historically elevated levels in 2025, Goldman does not anticipate a major equity downturn unless a recession occurs. The Federal Reserve is expected to ease monetary policy modestly, supporting growth without causing renewed inflationary pressures.
Peter Oppenheimer, Goldman’s chief global equity strategist, notes that the current macroeconomic environment reduces the likelihood of a sharp equity setback despite stretched valuations. He describes equity cycles moving through phases of despair, hope, earnings-driven growth, and finally optimism. According to Goldman’s analysis, markets are now in this late optimism phase, which can sustain further gains but increases sensitivity to earnings disappointments.
Diversification remains crucial for investors. Geographic diversification proved beneficial in 2025 as US equities trailed several overseas markets for the first time in over a decade, aided by a weaker dollar. Europe, Japan, China, and broader Asian markets saw stronger dollar-adjusted returns driven by earnings recovery and valuation expansion. Goldman expects this convergence in growth-adjusted valuations between US and non-US markets to continue in 2026, even as absolute US valuations stay relatively higher.
Additionally, the bank anticipates broader sector leadership in the coming year. Non-technology stocks are likely to benefit from spillover effects linked to artificial intelligence investment. While AI remains a prominent market theme, Goldman does not view the current environment as a speculative bubble. Technology sector outperformance has been supported by sustained profit growth rather than excessive valuations alone.
For forex traders, these insights suggest cautious optimism towards global equities in 2026, with attention to earnings trends and broad market diversification. The prospect of modest Fed easing and a weaker dollar could continue influencing currency moves alongside equity market developments.
Original Source: Eamonn Sheridan of investinglive.com
