Goldman Sachs turns bullish on stocks through year-end

what happened

MarketWatch reports that Goldman Sachs has again adopted a positive stance on equities for the coming three months. The bank’s strategists pointed to firm earnings and a retreat in valuations after the summer decline, moving to an overweight position in U.S. and Asian stocks. They retain that view for the 12-month horizon. In September, their shorter-term equity assessment was neutral because of possible turbulence in bond markets, U.S. midterm elections and geopolitical tensions.

The S&P 500 has largely traded sideways since the summer, rising about 0.8% between June and August despite strong corporate results. FactSet puts the index’s forward 12-month price-to-earnings multiple at 19.1, down from 21.1 in early June and 22 at the start of the year. The sharpest valuation decline came from technology, particularly hardware, although some areas of the sector have become more expensive. Goldman also noted that 10-year and 30-year Treasury yields have reached levels not seen for more than two decades, putting particular pressure on rate-sensitive parts of the equity market.

The strategists expect third-quarter results in both the U.S. and Europe to beat expectations as the reporting season begins this week. Wall Street analysts see S&P 500 earnings increasing 29.6%, according to FactSet, which would mark a third consecutive quarter with growth above 25%. Goldman expects earnings momentum to remain solid through year-end and its U.S. team projects an 18% increase in S&P 500 earnings during 2027, excluding “other income” tied to the revaluation of equity holdings.

The bank identifies higher interest rates and energy costs as the main immediate threats, while uncertainty around the U.S. midterms could lift equity volatility from current low levels. Its preferred barbell combines global technology shares with low-volatility, high-dividend stocks that are sensitive to rates; Goldman says the latter have become cheaper since summer. The bank also moved to an overweight position in bonds for the next 12 months, while keeping a neutral three-month view. It favors shorter maturities and remains overweight cash, including short-term Treasury bills. Goldman expects normalizing inflation, a peak in energy prices and more dovish central banks eventually to make 10-year bonds a portfolio hedge rather than a headwind, although energy and monetary-policy uncertainty remain elevated.

why it matters

The view is relevant for markets because earnings support equities while higher Treasury yields and energy prices remain counterweights. Goldman’s allocation favors technology, selected defensive dividend shares and short-duration instruments.

instruments