Goldman Sachs expects global equities to deliver “lower but attractive returns” in 2026, supported by resilient growth, easing inflation and continued policy support. 

In its latest Global Opportunity Asset Locator note, analyst Christian Mueller-Glissmann said the bank “remain[s] modestly pro-risk into 2026 given a friendly baseline of sturdy global growth, further declines in inflation and continued policy support.”

Goldman Sachs warned that some of the strongest tailwinds of recent years are fading. 

Mueller-Glissmann noted that “reduced tailwinds from monetary policy” mean fiscal and regulatory easing will instead take the lead, while “AI tailwinds are likely to shift from capex to adoption.” 

The bank also pointed to elevated valuations and “compressed” risk premia, which it described as “typical late cycle.”

Still, Goldman Sachs believes equities should benefit from improving economic momentum. 

The firm wrote that “equities tend to perform well with better growth, policy easing and falling inflation,” adding that being underinvested late cycle “can be costly.” 

Earnings growth is expected to drive most of the upside next year, with potential for “valuation expansion” if optimism holds. Goldman Sachs cited “strong corporate balance sheets” that could support shareholder returns and capital markets activity.

However, the bank cautioned that the macro backdrop “might turn less friendly in 2H” as U.S. recession risks rise. 

Even so, Goldman Sachs said it prefers equities over credit, arguing that credit returns are constrained by “tight credit spreads” while equities can still offer “attractive returns driven by earnings growth.”

Regionally, Goldman Sachs is overweight Asia ex-Japan, neutral on the U.S. and Japan, and underweight Europe.