Goldman Sachs believes global stock markets still have room to climb and is upgrading its stance accordingly. In a Monday research note, the firm raised its rating on global equities to “overweight” from “neutral” for the next three months, citing a combination of solid earnings growth, an easier Federal Reserve policy without a recession, and ongoing fiscal support from major economies as reasons for optimism.
“Markets have continued with their ‘risk-on’ shift supported by a Goldilocks backdrop based on optimistic growth expectations (boosted by AI) with dovish Fed expectations,” wrote Christian Mueller-Glissmann, head of asset allocation research at Goldman Sachs in London. He argued that while classic Goldilocks regimes—periods of strong growth paired with low inflation—can endure for extended periods as they did in the 1990s, today’s version is different. “Weak labor market conditions are driving Fed dovishness rather than anchored inflation,” he said, underscoring the unusual mix of forces behind current market strength.
According to Goldman, a key part of the bullish story is that investors have not yet piled into stocks with the enthusiasm typically seen in long rallies. “Unlike previous Goldilocks periods, positioning hasn’t reached very bullish levels—flows into bonds, gold, and money markets stay strong while surveys remain somewhat bearish (only retail investors are more bullish),” Mueller-Glissmann wrote. This backdrop, he said, leaves room for more upside if fundamentals keep improving. “We remain modestly pro-risk in our asset allocation,” he added.
The note also highlighted how artificial intelligence is acting as an incremental driver for growth expectations and capital expenditure, reinforcing the “risk-on” tone. Yet Goldman cautioned that the market’s Goldilocks narrative could unravel. Mueller-Glissmann pointed to three scenarios that could shift sentiment: a growth shock stemming from a rising unemployment rate or disappointing AI rollouts; a rate shock if the Fed fails to deliver on its dovish guidance or if long-term yields rise on fears of fiscal dominance; or a renewed bout of pessimism surrounding the U.S. dollar’s outlook.
Even so, Goldman’s call signals confidence that a constructive mix of corporate earnings strength, policy easing and ongoing AI-driven investment can continue to support equities over the near term. For investors, the message is that while risks remain, the underlying trend still looks favorable compared to bonds, gold and cash-like instruments—especially given the still-muted positioning across institutional portfolios.
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