Goldman restores equity overweight while retaining bond exposure

what happened

Seeking Alpha reported that Goldman Sachs has returned to an overweight view on global equities for the coming three months. The bank pointed to durable profit growth and a decline in valuations, which it said had improved the balance between potential returns and risks before third-quarter results. The change brings its three-month equity allocation into line with an overweight position already held for the 12-month period.

Goldman said worldwide stocks had remained rangebound since the summer. Higher bond yields and energy costs had countered the support from earnings, while the resulting valuation compression left more room for gains if interest rates moved lower. The bank also adopted an overweight view on government bonds over 12 months, but stayed neutral over three months and continued to favor cash in the immediate term.

According to Goldman, elevated starting yields, improved carry and the possibility of inflation returning toward normal levels could strengthen the case for longer-duration bonds over an extended horizon. That would gradually restore their use as a portfolio hedge. For now, uncertainty tied to interest rates, tensions in the Middle East and the U.S. midterm elections supports a cautious approach to duration.

The bank moved back to underweight credit over three months, matching its 12-month stance. It still prefers equities to corporate debt, saying stocks present the better outlook. Credit spreads have widened, Goldman said, but remain tight compared with all-in yields; ongoing issuance and corporate releveraging are additional headwinds. The firm’s economic view is still constructive, with resilient expansion, limited recession risk and easing inflation expected to provide a more supportive setting into 2027. Goldman’s U.S. equity team continues to project 18% S&P 500 earnings growth in 2027, excluding other income from revaluing equity stakes. The bank also expects third-quarter results to beat expectations in both the U.S. and Europe. Within stocks, it favors a barbell combining artificial-intelligence beneficiaries in technology with selected rate-sensitive, high-dividend and low-volatility shares that could benefit when rates eventually ease. Still, pronounced rate volatility, energy prices and election uncertainty may keep markets unsettled in the near term.

why it matters

Goldman’s allocation changes favor stocks and longer-dated sovereign debt while signaling caution on credit, reflecting the tension between improving valuations and persistent rate-related risks.

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