• Goldman Sachs (GS) upgrades global equities to overweight over three months and bonds to overweight over 12 months, citing strong earnings and improved valuations.
  • The call is staggered: the bank remains neutral on bonds for the next three months, awaiting clearer inflation and energy price trends.
  • Earnings forecasts vary, but analysts expect robust S&P 500 profit growth; Treasury yields near multi-decade highs make longer-term bonds increasingly attractive.

A Dual Upgrade with a Twist

Goldman Sachs has turned more bullish on global stocks over the next three months and bonds over the next 12 months, but the firm’s strategists emphasize this is a staggered allocation call, not a prediction that both markets will immediately rally. The team, led by Christian Mueller-Glissmann, raised global equities from neutral to overweight over three months, matching its existing 12-month overweight rating. The argument: recent valuation declines have improved the balance of potential gains and losses heading into earnings season.

For bonds, Goldman moved to overweight over 12 months but retained a neutral three-month stance. The central thesis is that bonds should gradually shift from a “portfolio headwind to hedge,” rather than that the recent bond selloff has definitively ended. “We’re not calling the end of the bond bear market,” a person familiar with the matter said, “but the risk-reward has improved meaningfully for longer-term investors.”

The upgrade comes as the benchmark 10-year Treasury yield hovers near 5.24%, its highest level in over two decades, making bonds more competitive with equities. Meanwhile, the S&P 500’s forward price-to-earnings multiple has fallen to about 21 times from 25 times a year earlier, providing valuation support for stocks. Goldman favors a “barbell” equity strategy, combining global technology companies with selected rate-sensitive, bond-like stocks that have sold off since summer. Regionally, the bank remains overweight the U.S. and Asia, and underweight Europe.

Earnings Outlook and Fed Policy in Focus

The bullish equity call hinges on strong corporate profits. Goldman’s strategists point to expectations for nearly 30% year-over-year S&P 500 earnings growth in the third quarter, though estimates vary by source. Bloomberg Intelligence puts the figure at 25%, while a separate report citing LSEG (LSEG.L) IBES pegs it above 30%. These are forecasts, not reported results, and the methodologies are not reconciled. “The earnings bar is high, but companies have consistently cleared it,” said a strategist who declined to be named. “If guidance holds up, there’s room for further gains.”

On monetary policy, Goldman initially expected another Fed hike in October but shifted that forecast to December after softer inflation data. The Fed raised its target range by 0.25 percentage point in September to 3.75%–4.00%, its first increase in three years. Goldman now sees a substantial chance that further increases may prove unnecessary. However, a “more dovish Fed” currently means a potentially slower pace—or cessation—of additional rate increases, not an already-announced return to rate cuts.

Higher energy prices and interest rates remain the principal near-term threats to the equity call, Goldman’s strategists cautioned. The bank also flagged election-related volatility as a risk ahead of the U.S. midterm elections, without identifying a particular outcome as necessary for its bullish case.

Goldman’s Own Business in Transition

Separately, Goldman Sachs continues to narrow its consumer-banking ambitions. In January, the firm agreed to transition the Apple (AAPL) Card and its associated accounts to JPMorgan Chase (JPM), a move described as substantially completing the retreat from consumer credit cards. The transition is expected to take approximately 24 months and is not yet a completed handover. Goldman continues to operate the program during the transition.

Goldman is scheduled to report third-quarter results on Tuesday, October 13. Consensus estimates put revenue at $16.74 billion and earnings per share at $13.02, according to a CNBC (VSNT) preview. The bank’s second-quarter results, reported earlier, showed net revenue of $20.34 billion, up 39% year over year, with net earnings of $6.63 billion and earnings per common share of $20.98. Annualized return on common equity was 23.5%. Global Banking & Markets revenue rose 53%, while Asset & Wealth Management revenue increased 20%.

David Solomon remains chairman and CEO. The Apple Card transition is distinct from the investment-strategy upgrade: one concerns Goldman’s own business mix; the other concerns its analysts’ recommendations for client portfolios.

Market Implications and Competing Views

The dual upgrade has drawn attention for its timing. Other banks have also turned more positive on U.S. equities recently. Bank of America (BAC) and Barclays (BCS) strategists have cited the earnings outlook as a reason for optimism, suggesting Goldman’s shift is part of a broader improvement in sentiment rather than an isolated call.

Yet not everyone agrees on the policy path. Reuters (TRI) reported in September that Morgan Stanley (MS) and Macquarie (MQG.AX) added a March 2027 hike to their forecasts, illustrating disagreement over the Fed’s next moves. Those forecasts should not be confused with confirmed future Fed decisions.

The immediate tests for Goldman’s call will be bank earnings beginning October 13, September CPI data on October 14, and the Fed’s October 27–28 meeting. “The data needs to cooperate,” said a portfolio manager at a large asset manager. “If inflation surprises to the upside or energy prices spike, both calls could be challenged.”

Goldman Asset Management’s October outlook notes that higher global yields stem from stronger growth expectations, sticky inflation, fiscal concerns, and competition for capital associated with AI investment. While that creates attractive income opportunities, it also tightens financing conditions. For companies seeking financing, elevated rates make borrowing more demanding, and Goldman’s upcoming earnings discussion will be watched for signals on mergers, acquisitions, and IPO activity.

For income-focused savers and bond investors, higher starting yields offer better income potential, though bond prices can still fall if yields rise further. Equity investors face a more supportive earnings backdrop but remain sensitive to rate and energy-price shocks. Goldman’s neutral three-month bond stance shows that it does not yet regard near-term interest-rate risk as resolved. The longer-term bond case combines higher income today with the possibility of capital gains if yields eventually fall—a forecast that depends on easing inflation or slower growth.

Correction: An earlier version of this article misstated the timing of Goldman’s next-hike forecast. It was postponed from October to December, not from September to December.