Goldman sees lower but attractive 2026 equity returns: AI shift to adoption, credit capped

Goldman Sachs anticipates lower yet attractive equity returns for 2026, highlighting the outlook of resilient growth, easing inflation, and consistent policy support amid fading tailwinds from recent years. The firm's strategist, Christian Mueller-Glissmann, emphasizes a modestly pro-risk stance going into 2026, advising against being overly defensive in a maturing cycle, which could be costly. They'll likely see emerging support from fiscal and regulatory easing instead of looser financial conditions, marking a shift in the drivers of returns. AI is expected to transition from a capex-heavy phase to broader adoption and monetization, potentially broadening market leadership beyond major tech firms. Elevated valuations and compressed risk premia are described as typical of late-cycle dynamics, suggesting limited room for significant multiple expansion, with earnings growth becoming crucial. Regionally, Goldman is overweight Asia ex-Japan, neutral on the US and Japan, and underweight Europe.