Goldman Sachs Shares 2026 Forecast for Global Equities

Goldman Sachs has issued its 2026 outlook for global equities, forecasting a total return of 11% across major markets. This includes dividends and is supported by earnings growth and economic expansion. The bank expects the S&P 500 to reach 7,600 by year-end, reflecting a 12% total return. The projection is based on a favorable macroeconomic environment and continued adoption of artificial intelligence in industries.

The firm attributes its positive outlook to a combination of healthy global economic growth and easing monetary policy. It notes that the U.S. Federal Reserve is expected to continue policy easing in 2026. This reinforces a backdrop favorable for equities. Goldman Sachs anticipates that earnings per share for the S&P 500 will increase by 10% in 2027.

Global GDP growth is projected at 2.8% for 2026. This expansion is expected to be broad-based across all regions. The bank also highlights that while valuations remain high, they are in line with historical levels and expected to support continued returns. Analysts suggest that the optimism phase of the market cycle is in effect, with potential for valuation expansion if market sentiment holds.

Why Did This Happen?

Goldman Sachs sees a shift from monetary policy tailwinds to fiscal and regulatory easing as a key driver for equities. The bank's report also mentions that AI-related investments are transitioning from capital expenditure to operational adoption. This shift is expected to enhance productivity and profit margins. However, the report cautions that reduced tailwinds from monetary policy mean that other factors must now support equity performance.

The report acknowledges that valuations and compressed risk premia are typical of a late-cycle environment. While this may pose risks, the firm believes that being underinvested late cycle can be costly. Goldman Sachs also notes that equity gains in 2026 may not match the sharp rally seen in 2025, signaling a more measured return path.

How Did Markets React?

Markets have generally responded positively to the forecast, with major indices showing strength. However, some volatility is expected, particularly in the first half of the year as U.S. recession risks rise. The bank warns that macroeconomic conditions might become less favorable in the second half of 2026. This caution reflects uncertainties around economic growth and the potential for abrupt interest rate changes.

Cryptocurrencies have shown mixed reactions to the equity forecast. Bitcoin, for example, has experienced uneven swings, indicating a distinct trajectory from traditional equities. Despite some periods of positive correlation with the S&P 500, Bitcoin's price action is increasingly influenced by internal supply dynamics rather than equity market sentiment. This divergence has led to growing interest in how risk appetite is positioned across asset classes.

What Are Analysts Watching Next?

Analysts are closely monitoring the adoption of AI across industries as a key growth driver. The bank suggests that AI will shift from capital expenditure to operational efficiency in 2026. This shift could support earnings growth and enhance corporate performance. Investors are advised to watch how this transition unfolds and its impact on valuations.

Another area of focus is the potential for valuation expansion in equities. While Goldman Sachs expects most of the returns to come from fundamental profit growth, it notes that rising valuations could add to the upside. This scenario depends on how optimistic market sentiment remains. The firm's analysts also highlight the importance of strong corporate balance sheets in supporting shareholder returns and capital markets activity.

The Fed's policy decisions and their impact on market conditions will also be critical. Federal Reserve Bank of New York President John Williams recently indicated that monetary policy is well positioned to support economic stabilization and inflation reduction. He expects the job market to stabilize in 2026, with inflation returning to the 2% target by 2027.

Investors are advised to remain cautious as policy uncertainty and geopolitical tensions persist. The current environment is marked by elevated valuations and compressed risk premia, which are typical of a late-cycle phase. These conditions suggest that investors should be prepared for potential volatility and adjust their portfolios accordingly.

The report also highlights the importance of regional diversification in investment strategies. Goldman Sachs is overweight in Asia ex-Japan, neutral in the U.S. and Japan, and underweight in Europe. This stance reflects varying growth prospects and market conditions across regions. Investors are encouraged to consider these regional dynamics when making allocation decisions.