Goldman Sachs believes that macro conditions look favorable for three sectors of the stock market.
In a new episode of the bank’s Exchanges podcast, Goldman managing director Ryan Hammond says market broadening has been the dominant theme in the markets so far this year as investors exit their tech-heavy portfolios.
According to Hammond, Goldman economists are to predict Stronger economic growth in the US this year, which could benefit stocks that have been largely ignored in recent years.
“You can see that in the outperformance of non-US stocks versus US stocks, small caps are outperforming large caps for the first time in a while, and cyclicals are outperforming defensive stocks. And we believe there is a good macroeconomic reason for this broadening.
Our economists here at Goldman predict that economic growth will accelerate in the first part of 2026 as headwinds from tariffs diminish and gain support from financial conditions and fiscal policy. All this will lead to an acceleration of economic growth above the trend, above the consensus. And that’s good for the cyclical parts of the market that haven’t really driven the markets higher for a long time.”
Hammond names several sectors that could propel the S&P 500 to even greater heights this year as more investors move into overlooked businesses.
“And so parts of the market, like consumer discretionary companies or transportation companies or part of the industrial complex, are really driving the markets higher.
And we think there’s probably room for that if the macro environment remains friendly. So you have kind of a confluence of factors happening at the same time that are leading to some of these rotations under the hood of the index.”
At the time of writing, the S&P 500 is trading at 6,861 points.
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