Author: Goldman Sachs
Compiled by: Shenchao TechFlow
Original title: Goldman Sachs Predicts: Global Stock Markets Expected to Achieve 11% Return in the Next 12 Months
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Following last year's strong growth, Goldman Sachs Research predicts that global stock markets are expected to continue climbing in 2026, with an anticipated return of 11% over the next 12 months (including dividends, in USD terms).
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Although last year's stock market rally has left valuations at historically high levels, corporate earnings and economic growth globally are expected to continue supporting the markets.
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Last year, investors benefited significantly from cross-regional diversification, a trend that is likely to continue. Additionally, diversification across investment styles and sectors is expected to further enhance returns.
According to Goldman Sachs Research, the global bull market is likely to continue this year, driven by growth in corporate earnings and sustained economic expansion. However, the gains in the stock market are expected to be lower than the significant rally seen in 2025. In 2026, the global economy is expected to maintain expansion across regions, and the US Federal Reserve is anticipated to continue with moderate easing policies.
"In the current macroeconomic context, even with high valuations, a significant stock market correction or bear market without an economic recession would be unusual," wrote Peter Oppenheimer, Chief Global Equity Strategist at Goldman Sachs Research, in his report titled "Global Equity Strategy 2026 Outlook: Tech Tonic—a Broadening Bull Market."
Diversification was a core theme emphasized by Goldman Sachs Research last year. In 2025, for the first time in many years, investors who diversified across regions were rewarded. Goldman Sachs analysts expect this trend to continue in 2026 and expand to include diversification across investment factors such as growth and value, as well as across various sectors. (Investment factors refer to asset characteristics such as size, value, or momentum that typically influence risk and return.)
What Is the Outlook for Global Stock Markets in 2026?
Despite the strong performance of stock markets in 2025, outperforming commodities and bonds, the rally was not smooth. At the beginning of the year, stocks underperformed, with the S&P 500 experiencing a nearly 20% correction from mid-February to April before rebounding.
Peter Oppenheimer, Chief Global Equity Strategist at Goldman Sachs Research, noted that the strong rally in global stock markets has left valuations at historically high levels across all regions, including the US, Japan, Europe, and emerging markets.
"Therefore, we believe that returns in 2026 are more likely to be driven by fundamental earnings growth rather than further valuation expansion," Oppenheimer said. According to Goldman Sachs analysts' forecasts as of January 6, 2026, global stock prices (weighted by regional market capitalization) are expected to rise by 9% over the next 12 months, achieving an 11% return in USD terms (including dividends). He added, "Most of the return will come from earnings-driven growth."
Additionally, according to another Goldman Sachs forecast, commodity indices are also expected to rise this year, with gains in precious metals once again offsetting declines in energy prices, a trend similar to 2025.
Oppenheimer's team also studied the typical evolution of market cycles: the despair phase during bear markets when stocks fall; the brief hope phase during market rebounds; the longer growth phase where returns are driven by earnings growth; and finally, the optimistic phase where investor confidence strengthens and even becomes complacent.
Their analysis suggests that stocks are currently in the optimistic phase of a cycle that began with the bear market during the COVID-19 pandemic in 2020. "This late-cycle optimistic phase is often accompanied by rising valuations, indicating that there may be some upside risk to our core forecast," Oppenheimer's team wrote.
Should Investors Diversify Their Stock Portfolios in 2026?
In 2025, geographical diversification provided significant benefits to investors, which is uncommon. US stock markets underperformed other major markets for the first time in nearly 15 years. Due to the depreciation of the US dollar, the returns from European, Chinese, and Asian stock markets were almost double the total return of the S&P 500.
Returns in US stock markets were primarily driven by earnings growth, especially from large technology companies. However, outside the US, the balance between earnings improvement and valuation expansion was more even. Last year, the growth-adjusted valuation gap between US and global markets narrowed.
"Even though absolute valuations in the US remain high, we expect these growth-adjusted valuation ratios to continue converging in 2026," Oppenheimer's team wrote.
Oppenheimer noted that diversification is still expected to provide better risk-adjusted returns in 2026. He advises investors to explore broad geographical investment opportunities, including increased focus on emerging markets. At the same time, investors should balance between growth and value stocks and pay attention to different sectors. Additionally, they can look for opportunities where correlations between stocks decrease, providing room for stock picking.
"As stock correlations decline and may remain low, we are also paying more attention to enhancing alpha," wrote Peter Oppenheimer, Chief Global Equity Strategist at Goldman Sachs Research. Alpha measures an asset's performance relative to a broader market index.
Oppenheimer added that non-technology sectors may perform strongly this year, and investors could profit from stocks benefiting from technology companies' capital expenditures. Furthermore, as new capabilities of artificial intelligence (AI) are gradually realized, market attention may increasingly focus on companies outside the technology sector that benefit from AI development.
Are AI Stocks in a Bubble?
Overall, market focus on artificial intelligence "remains intense," Goldman Sachs analysts noted. However, this does not mean there is a bubble in the AI sector. "The dominance of the technology sector in the market was not triggered by the rise of AI," Oppenheimer wrote. "This trend began after the financial crisis and has been supported by its exceptional earnings growth."
Despite the surge in stock prices of large technology companies, current valuation levels have not reached the extremes seen in previous bubble periods. For example, comparing the valuation gap between the five largest companies by market capitalization in the S&P 500 and the other 495 stocks shows that this gap is much smaller than in previous cycles, such as the peak of the tech bubble in 2000.
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