Goldman Sachs AM: Identifying Performance Catalysts in a More Complex World

Mixed Signals from Central Banks

Goldman Sachs Asset Management predicts that stock markets will enter 2026 under the banner of « increased dispersion, » breaking away from years dominated by a few large-cap companies. In the United States, the « Magnificent 7 » continue to strengthen their positions due to the robustness of their core businesses and massive reinvestments in artificial intelligence. Capital expenditures in AI by hyperscalers — Amazon, Google, Meta, Microsoft, Oracle — are expected to remain very high in 2026. However, the increasing homogeneity of performance is paving the way for diversification beyond the narrow circle of tech giants.

According to Sung Cho, co-head of technology investment, AI now extends well beyond infrastructure. Applications are multiplying in automation, customer experience, and operational intelligence, creating new opportunities for platforms that facilitate the integration of AI into the core of businesses.

US small caps, notably in defense, technology, consumer goods, or healthcare, could benefit from these dynamics — yet their volatility and liquidity needs require demanding active management. In Europe, the bank anticipates a rebound in capital expenditures, supported by increased budgetary flexibility and reindustrialization efforts. Energy, defense, and financial services are expected to remain key sectors, provided that lagging segments start to catch up.

In Japan, Goldman Sachs AM sees continued favorable conditions: moderate inflation, stable monetary policy, and potential fiscal support under a Takaichi administration. AI, semiconductors, and geopolitical dynamics add further tailwinds, although valuations need monitoring. In emerging markets, the weakening of the dollar in 2025, declining oil prices, moderated inflation, and a more accommodating Fed policy have supported assets. Emerging market stocks trade at a 40% discount on the forward price-to-earnings ratio compared to US stocks, representing a historically attractive gap.

In bond markets, the divergence between central banks will shape 2026. GSAM anticipates two possible Fed rate cuts, a cautiously short-term ECB, a BoE likely to resume cuts by December, and a BoJ potentially raising rates due to persistent inflation and robust growth. This heterogeneity creates as many risks as it does opportunities. Income opportunities (« carry ») could be sought in AAA or BBB-rated CLOs, high yield bonds, or certain flexible duration exposures. However, the bank warns that signals of a potential reversal in the credit cycle should be closely monitored.

Opportunities in Infrastructure

On private markets, Goldman Sachs AM describes an environment where the dispersion among managers could increase. The rise in transactional volumes is expected to provide Limited Partners with more data to assess General Partners' performance. General Partners will need to identify new growth areas capable of surpassing the overall macroeconomic dynamics, especially important given the still-high valuations.

Private equity is regaining a strong pace of activity, driven by more fluid capital markets and decreasing financing costs. Michael Bruun, global co-head of private equity, believes that value creation and operational resilience will be crucial for attracting interest from strategic buyers and public investors. The secondary market is expected to continue its development, supported by attractive entry points and shorter liquidity horizons. Continuation vehicles and secondary funds will play a central role in absorbing the backlog of accumulated exit transactions.

In venture capital and growth equity, opportunities are emerging for investors with available liquidity. Many leading companies, which were previously inaccessible due to excessive valuations, are becoming fundable under more balanced conditions. The long-term trend of companies staying private longer and seeking larger funding amounts continues to support demand for growth equity.

Private credit remains one of the most attractive asset classes on a risk-adjusted basis. A more dynamic mergers and acquisitions market is likely to accelerate the demand for financing while increasing interest in mezzanine solutions. Private credit continues to deliver higher returns than public markets, with historically lower default rates compared to syndicated loans. However, the bank emphasizes that the quality of origination and managers' experience through cycles will be crucial in the event of a downturn.

In real estate, a rebound is deemed possible thanks to prospects of further rate cuts. Following a recovery in activity in 2025, the decrease in capital costs and the historically low levels of dry powder (the lowest since 2020) could create attractive entry opportunities. However, there will be significant dispersion across geographic areas and sectors.

Lastly, in infrastructure, AI and digitization remain dominant themes, but GSAM also sees opportunities in the circular economy—waste management, water, recycling—driven by contractual revenues and low exposure to macroeconomic cycles. According to Tavis Cannell, global head of infrastructure, the next wave of opportunities could be embodied in mid-market projects, where active ownership and value creation offer the greatest potential.