Why Goldman Sachs Just Flipped on Global Stocks

This article first appeared on GuruFocus.

Goldman Sachs (NYSE:GS) strategists are turning more constructive on equities, suggesting that global stocks could extend their rally into year-end. The team led by Christian Mueller-Glissmann has shifted to an overweight stance on equities over the next three months, pointing to a favorable mix of earnings growth, Federal Reserve easing, and global fiscal support. In their view, late-cycle slowdowns often reward equity investors when policy remains supportive, creating opportunities for those willing to buy into market dips.

The optimism builds on a market backdrop where the S&P 500 (SPY) has already reached record highs, powered by renewed enthusiasm for artificial intelligence and the Fed’s decision to cut rates in time to possibly avoid recession. Goldman’s US strategists earlier this month lifted their short-term target for the index, now seeing room for an additional 2% gain to 6,800. Still, investors are watching closely for signals from the upcoming earnings season, with consensus pointing to 7.1% year-over-year profit growth in the third quarterthe smallest increase in two yearsamid signs of a cooling US labor market and potential tariff headwinds.

Even with this constructive outlook, Goldman cautions that risks remain, particularly if shocks in growth or interest rates disrupt momentum. The firm has trimmed its near-term view on credit to underweight, though it remains less negative on the asset class over 12 months, citing supportive supply-demand dynamics and relatively low recession risk. Their overarching call is for diversification across regions, with equities remaining a favored asset as investors weigh policy easing, resilient earnings, and shifting macro conditions heading into year-end.