Author: Rita
The MSCI All-Country World Index rose 2.9% last week, led by a 3.7% gain in the US. However, AI-related trading remained volatile, with South Korea's KOSPI dropping 7.4% for the week, while the technology sector overall gained 5.5%. In its global weekly Kickstart report dated August 10, 2026, Goldman Sachs pointed out that the earnings picture is broadening. EPS revisions for the Emerging Markets (EM) region continue to be upgraded, with technology sectors in South Korea and Taiwan contributing the most, and financials, industrials, and energy also making significant contributions. Goldman Sachs's assessment is that the most intense phase of AI-related deleveraging may have passed, but volatility will not disappear. Valuations in South Korea have retreated from their highs, positions have been cleared, and strategic allocation value has re-emerged.
AI Volatility and Deleveraging Coincide, Risk Appetite Remains Elevated
Goldman Sachs's risk appetite indicator has further risen above 1.0 from positive territory. Over the past two weeks, global technology stocks experienced their largest net selling by long-only funds since 2014, with the total net selling over two consecutive days ranking second over the past decade. Goldman Sachs believes the extreme readings of this deleveraging wave have appeared, but AI-related volatility will not vanish in the near term.
The MSCI All-Country World Index is up about 14% year-to-date, fully recovering losses incurred in March and April due to escalating geopolitical conflicts. The technology sector rose 5.5% last week, communication services gained 3.3%, and financials advanced 2.7%. Energy was the only declining sector, down 3.1%, with Brent crude falling over 8%. Goldman Sachs's year-end 2026 target for the S&P 500 is 8,000 points, with a 12-month target of 8,300 points, implying approximately 7% upside. The 12-month target for the MSCI Asia Pacific ex-Japan index is 1,080 points, implying about 26% upside.
Earnings Breadth Expands, EM and Europe Revisions Continue Upward
Earnings revisions in the EM region continue to improve, with EPS expectations for both 2026 and 2027 being upgraded. Technology sectors in South Korea and Taiwan are the primary contributors, with financials, industrials, and energy also providing important contributions. Goldman Sachs's earnings sentiment indicator shows that the number of EM upgrades is accelerating.
In European markets, Eurozone EPS revisions have been consistently upgraded since April, now surpassing those of the US for the first time since January 2025. Goldman Sachs's macro forecasts project global GDP growth of 2.8% in 2026, with 1.9% for developed markets and 4.2% for emerging markets. S&P 500 EPS growth is projected at 9% for 2026, STOXX Europe 600 at 4%, MSCI Asia Pacific ex-Japan at 6%, and Topix at 7%. The broadening earnings picture is providing broader fundamental support for global equities, no longer confined to a few AI-related stocks.
South Korean Valuations Have Retreated from Highs, Strategic Allocation Value Re-emerges
Goldman Sachs's regional focus this week is on South Korea. The KOSPI fell 7.4% last week, down approximately 40% from its June high. Goldman Sachs believes that although AI capital expenditure continues, memory supply remains tight, and profit expectations remain positive, valuations have retreated from their peaks. Leveraged ETF size has shrunk from highs, reducing leveraged exposure. Position clearing has been facilitated by tighter regulation and reduced hedge fund exposures. Goldman Sachs's strategic view on South Korea remains unchanged, seeing allocation value at current levels.
Looking at the EM region overall, valuations remain discounted relative to developed markets, fund inflows are accelerating, and Chinese trade headwinds are easing. Goldman Sachs expects EM EPS growth to reach 4.1% in 2026, higher than the 1.9% for developed markets. The MSCI Emerging Markets Index trades at a forward 12-month P/E of about 12x, still below the approximately 20x level for developed markets.
Extreme readings from AI-related deleveraging have appeared, earnings breadth is expanding, and EPS revisions in EM and Europe continue upward. Goldman Sachs believes market breadth is improving, and the clearing of AI-related positions provides tactical opportunities. South Korea has seen the largest decline, but new semiconductor supply won't be released on a large scale until after 2028, making the combination of valuations and positioning at current levels attractive.
Disclaimer: This article is Chao Xiang Research's compilation and interpretation of a third-party brokerage research report (Goldman Sachs, August 10, 2026), combined with the compilation of public market information. The ratings, target prices, earnings forecasts, and related judgments cited in the article are the views of that brokerage's analysts, representing only the stance of their respective institution. They do not represent the views of Chao Xiang Research, nor do they constitute any investment advice. Markets carry risks, and decisions should be made independently. This article should not be used as a basis for buying or selling any securities.
