• Goldman Sachs maintains an overweight stance on equities but warns returns will moderate from recent highs.
  • The bank cites elevated yields, energy prices, and stretched sentiment as near-term risks, while earnings growth and AI capex remain supportive.
  • Strategist Christian Mueller-Glissmann recommends buying pullbacks, forecasting continued upside into 2026 with lower single-year returns.

Goldman Sachs Sees Moderating Returns but Stays Bullish

Goldman Sachs expects equity returns to moderate after a strong rally, but the bank is not turning bearish. In a note released this week, strategist Christian Mueller-Glissmann said markets have rebounded to near record highs, driven by tech earnings and AI spending. However, elevated bond yields, rising energy prices, and stretched sentiment raise the risk of a correction.

“We still see a supportive macro backdrop,” Mueller-Glissmann wrote, emphasizing that earnings growth and AI-driven capital expenditure remain key drivers. He advised investors to buy pullbacks, a tactic Goldman has deployed in past volatility episodes. The bank maintains an overweight stance on equities over a 12-month horizon.

Broader Bull Market Underway

Goldman described the current cycle as a broadening bull market, with non-U.S. markets expected to contribute meaningfully to gains. The bank forecasts global equity price returns in the low-to-mid teens in 2026, with total returns around 15% including dividends. This reflects earnings momentum rather than multiple expansion, as valuations are already stretched.

“The cycle is shifting from a narrow tech-led rally to a more inclusive uptrend,” the note said. AI adoption is seen benefiting a wider range of industries beyond mega-cap tech, supporting broader earnings growth. The bank also cited ongoing but moderating monetary easing by the Federal Reserve as a tailwind.

Risks and Context

Despite the constructive outlook, Goldman acknowledged near-term headwinds. Higher yields and energy price volatility could trigger sharper pullbacks, while investor sentiment is “stretched,” leaving markets vulnerable to shocks. The bank’s recommendation to buy dips assumes any correction will be short-lived, underpinned by resilient corporate profits.

A spokesperson for Goldman Sachs declined to comment further on the note. The bank’s stance contrasts with some peers who have turned more cautious on equities given geopolitical risks and sticky inflation. Still, Goldman’s call reflects a belief that the macro backdrop remains supportive for risk assets, even as the pace of gains slows.

Correction: An earlier version of this article misstated the forecast timeframe. The 2026 outlook refers to calendar-year returns.