Goldman Sachs projects that global equities will deliver lower but still attractive returns in 2026. This outlook is based on a foundation of resilient economic growth, easing inflation, and ongoing policy support. However, the firm warns that some of the strongest tailwinds driving markets in recent years are beginning to fade.
In its latest Global Opportunity Asset Locator (GOAL) report, Goldman strategist Christian Mueller-Glissmann maintains a modestly pro-risk stance for 2026. He highlights that improving macroeconomic momentum combined with supportive policy environments tends to be positive for equities. The report cautions against becoming too defensively positioned late in the economic cycle, as underinvestment at this stage can prove costly.
A significant shift is expected in the sources of market support. The era of substantial monetary policy stimulus appears to be ending, with fiscal and regulatory easing likely to play a more prominent role in sustaining growth. Additionally, the impact of artificial intelligence is anticipated to transition from an initial capital expenditure-driven build-out phase to one focused on broader adoption and monetisation. This shift could expand market leadership beyond the largest technology companies.
Valuations and risk premia are described as “typical late cycle”—elevated valuations combined with compressed risk premia imply less scope for multiple expansion. Consequently, earnings growth will be the main driver of returns. Goldman remains cautiously optimistic about some potential valuation gains if investor optimism persists but expects strong corporate earnings, bolstered by healthy balance sheets supporting share buybacks and capital markets activity, to carry most of the load.
Goldman expresses a preference for equities over credit, noting that credit spreads are already tight and may limit returns. Regionally, it favours Asia excluding Japan, holds a neutral stance on the US and Japan, and is underweight Europe.
Original Source: Eamonn Sheridan of investinglive.com
