LIVE MARKETS-Goldman Sachs sees broader bull market in 2026, expects lower returns than 2025

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GOLDMAN SACHS SEES BROADER BULL MARKET IN 2026, EXPECTS LOWER RETURNS THAN 2025

Goldman Sachs expects global equities to deliver positive returns in 2026, but forecasts lower index returns than in 2025, amid a broadening bull market.

The firm forecasts 13% price returns (15% including dividends) in U.S. dollar terms, driven largely by earnings growth rather than valuation expansion.

The outlook is supported by continued global economic expansion and modest easing by the U.S. Federal Reserve, GS noted. The firm expects two 25 basis-point rate cuts by the Fed in March and June next year.

"Despite the intense investor focus on AI, this has been a good year to diversify," said Goldman strategists led by Peter Oppenheimer.

The firm added that for the first time in nearly 15 years, U.S. equities underperformed, while Europe, Asia, and emerging markets delivered stronger returns.

Goldman expects this trend to persist, with the U.S. likely to marginally underperform again in 2026 and highlights that tech capex is spilling over into "old-economy" sectors, boosting growth prospects for infrastructure-related industries.

The Magnificent 7 stocks remain influential, but their contribution to S&P 500 earnings growth is expected to decline from 50% in 2025 to 46% in 2026 as broader market earnings accelerate, the firm estimates.

Goldman projects EPS growth of 12% for the S&P 500 .SPX, 5% for STOXX Europe .STOXX, and 17% for emerging markets in 2026.

The brokerage also raised its 12-month forecast for STOXX Europe to 615 points from 595 points.

Risks include weaker economic growth, rising unemployment, and a potential tech-led correction given high sector concentration.

Credit risks are also rising, with AI-related issuers accounting for 30% of U.S. dollar credit issuance in 2025, strategists note.

It is key to diversify across regions, with a greater focus on emerging markets, and to broaden sector allocation to capture AI-related spillovers beyond technology, they added.

(Joel Jose)

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