SAP sued by o9 Solutions over alleged trade secret theft
Investing.com - The global growth and inflation backdrop should be supportive for risk appetite in 2026, despite recent volatility in stocks, according to analysts at Goldman Sachs.
Markets have fluctuated throughout the fourth quarter, as investors moved away from a so-called "Goldilocks" scenario featuring optimism over an artificial intelligence spending boom and expectations for Federal Reserve interest rate cuts.
Get more stock picks by Wall Street analysts by upgrading to InvestingPro - get 55% off today
Stocks have been particularly buffeted by worries over the sustainability of the AI spending binge, much of which has increasingly been underpinned by debt.
At the same time, some Fed officials have indicated less of a willingness to reduce rates further next year, as policymakers weighed signs of weakness in the American labor market against fears that more cuts could reignite inflationary pressures.
In a note, the Goldman analysts including Christian Mueller-Glissmann and Andrea Ferrario said there is now "limited upside but greater downside" in stocks, adding that this is "typical" in environments at the end of the business cycle. Although frothy equity valuations are "not a good market timing signal," they do suggest more vulnerability to further labor market slowing or intensifying AI worries, they added.
But the strategists said equities tend to perform well during "late-cycle slowdowns with policy easing, provided recession risk is low."
"In our macro baseline, the global growth/inflation mix should be supportive for risk appetite in 2026," the analysts said in a note. "Any weakness of the U.S. economy should be temporary, with support from the U.S. government reopening as well as monetary and fiscal policy easing into next year."
The analysts backed a "modestly pro-risk stance into 2026," that includes an "overweight" approach to stocks.
"The strong rally in equities [so far in 2025], coupled with macro headwinds and AI concerns, creates risk of setbacks into year-end," they wrote.
"However, with our friendly macro baseline into 2026, supported by policy easing, we would ‘buy the dip’ and would focus on diversification opportunities and hedges to protect our equity [overweight stance]."