Goldman Sachs sees global equities rising in 2026, but at slower pace than 2025

New Delhi [India], December 26 : Global equities are expected to continue their upward trajectory in 2026, supported by steady earnings growth and ongoing economic expansion, but investors should prepare for more moderate returns compared with the strong gains seen in 2025, according to an outlook report from Goldman Sachs.

The investment bank in its report titled '2026 Outlook: Tech Tonic a broadening bull market' said it remains "constructive" on equities, forecasting 12-month price returns of around 13 per cent next year, or roughly 15 per cent including dividends, measured in US dollars.

"We remain constructive on equities for 2026 as earnings continue to grow, but forecast lower index returns than in 2025, amid a broadening bull market," the Goldman Sachs report read.

While still robust, these returns would be lower than those delivered in 2025, reflecting elevated valuations and a broadening bull market, the report has asserted.

Goldman's outlook is closely tied to its macroeconomic expectations.

The investment banking firm anticipates continued global economic growth across regions, alongside further modest easing by the US Federal Reserve.

Against this backdrop, Goldman Sachs said a significant equity market correction or bear market would be unlikely without a recession, even though valuations are already high by historical standards.

Most of the expected gains in 2026 are projected to be earnings-driven, rather than the result of sharply higher valuations.

However, Goldman noted that markets appear to be in a late-cycle "Optimism" phase.

"2025 has been a good example of the early Optimism phase where many equity markets (particularly outside of the US, where valuations were much lower) have seen valuations rise with earnings. We believe that the Optimism phase will continue in 2026," the report read.

"While markets are likely to continue to rise in 2026, valuations are now high across the equity complex in each region compared with history."

The report highlighted that 2025 marked a turning point for investors after years of heavy concentration in US equities and technology stocks.

While growth stocks have continued to dominate performance in the US, value stocks have outperformed in Europe. Sector leadership has broadened as well, with many non-technology sectors delivering strong gains alongside the intense investor focus on artificial intelligence.

Goldman said this shift reinforces the case for diversification, especially given that equity markets, particularly in the US, remain highly concentrated by geography, sector and individual stocks.

In Goldman's view, the current environment calls for investors to stay invested but rebalance portfolios to improve risk-adjusted returns.

The firm recommends broad geographic exposure, with an increased focus on emerging markets, alongside a mix of selective growth and value strategies. Sector diversification is also key, it noted.

While Goldman expects markets to continue rising in 2026, it cautioned that valuations are now elevated across all major regions compared with historical averages. That makes diversification and disciplined positioning increasingly important as the optimism phase of the equity cycle continues.

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