Interview
Goldman Sachs Exchanges: Outlook 2026 | Episode 3: Assets and Allocation
Goldman SachsPeter Oppenheimer, Kamakshya Trivedi, Daan Struyven, Christian Mueller-Glissmann, Alyssa Nathan
- US economic growth is expected to continue with moderating inflation and declining interest rates, creating a supportive environment for risk assets.
- Global equity markets are forecast to perform well in 2026, driven by underlying profit growth rather than valuation expansion, with the current optimism phase projected to last at least through this year.
- Equity allocation in investor portfolios is expected to remain high due to recent strong performance, with the firm maintaining an overweight stance on equities for 2026.
- Investors are predicted to broaden AI exposure beyond hyperscalers to the application layer, energy generation, and data center sectors, while diversifying across sectors and regions to include Emerging Markets and Northern Asia, which offer the highest return forecasts.
- Specific sector outlooks include selectivity in financials benefiting from lower short-term but higher long-term rates, and strong growth expectations for industrials related to AI infrastructure, energy exploration, and distribution.
- The US dollar is projected to depreciate by approximately 3% in trade terms in 2026, while the US 10-year bond yield is expected to remain range-bound around 4.20%.
- Global interest rate dynamics will see the US Fed and Bank of England delivering cuts, whereas most other jurisdictions are expected to hold rates steady, with German bond yields rising toward 3.25% and UK yields declining from current highs.
- US power markets are anticipated to experience exacerbated scarcity and price increases, particularly in local markets like PGM, driven by data center demand.
- Gold prices are forecast to rise 10% to $4,900 by the end of the current year, supported by continued central bank purchases, while oil prices are expected to trend lower in 2026 before recovering in 2027 due to oversupply.
- Downside risks for the oil price forecast include a potential Russia-Ukraine peace deal and a recovery in Venezuelan production.
- Despite stretched valuations, equities are expected to rise if growth targets are met, though late-cycle conditions may bring higher volatility and wider credit spreads.
- Investors are advised to avoid carry trades in credit due to recession risks and tight spreads, while opportunities may exist for selective hedges following a volatility reset and for ramping up alternative allocations for diversification.
- The historical pattern of the last six months of a bull market potentially offsetting early bear market losses suggests equities will still deliver very good returns in 2026.