Goldman Sachs has issued a forecast for global equity returns, predicting “lower but attractive returns” in 2026, driven by resilient economic growth, easing inflationary pressures, and ongoing policy support. In a recent note from the bank’s Global Opportunity Asset Locator, analyst Christian Mueller-Glissmann emphasized a cautiously optimistic stance toward risk assets as the world navigates these economic conditions.
The firm acknowledged a notable shift in market dynamics, indicating that some of the supportive factors that have bolstered equities in recent years are beginning to wane. Mueller-Glissmann stated that the reduction in tailwinds provided by monetary policy would result in fiscal and regulatory easing taking a more central role. Additionally, he highlighted that the influence of artificial intelligence would likely transition from capital expenditures to broader adoption across sectors.
Despite concerns over elevated market valuations and “compressed” risk premiums typical of later market cycles, Goldman Sachs remains optimistic about the potential for equities to capitalize on improving economic momentum. The firm argued that equities historically perform well in environments characterized by stronger economic growth, supportive policies, and declining inflation rates. They warn that being underinvested during this late cycle could prove detrimental for investors.
Looking ahead, earnings growth is anticipated to be the primary driver of market upside in the coming year. There is also potential for “valuation expansion” provided that market optimism persists. Strong corporate balance sheets are expected to bolster shareholder returns and stimulate capital markets activity.
However, Goldman Sachs also raised caution regarding potential economic headwinds, noting that the macroeconomic landscape could become less favorable in the latter half of the year, particularly as recession risks in the U.S. escalate. Nevertheless, the firm expressed a preference for equities over credit assets, arguing that returns in the credit market are likely to be constrained by narrow credit spreads, while equities can still deliver attractive returns fueled by earnings growth.
In terms of regional investment strategy, Goldman Sachs indicated a preference for Asia excluding Japan, maintains a neutral position on the U.S. and Japan, and recommends an underweight stance on European equities.
