Low Recession Risk Prompts Goldman Strategists to Turn Bullish on Stocks

Global equities are poised to carry their momentum through the rest of the year, supported by a resilient U.S. economy, attractive valuations, and a more dovish Federal Reserve, according to strategists at Goldman Sachs Group Inc.

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The team, led by Christian Mueller-Glissmann, shifted to an overweight stance on equities over a three-month horizon. Their view rests on historical patterns, noting that stocks often perform strongly during late-cycle slowdowns when monetary policy becomes more supportive.

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“Solid earnings growth, Fed easing without triggering a recession, and fiscal support globally should continue to provide a favorable backdrop for equities,” the strategists wrote in a recent note. “With recession risk looking contained, we’d treat any market pullback as a buying opportunity into year-end.”

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While Goldman’s strategists upgraded equities, they cut their short-term view on credit to underweight from neutral, arguing that valuations there leave less room for upside. They pointed out that while equity valuations may already be elevated, the setup still favors stocks in the near term.

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Looking further out, the team remains constructive on both asset classes, though they see equities outperforming over 12 months, supported by low recession probabilities and favorable supply-demand dynamics.

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Global stocks have already surged to record highs, as optimism grows that the Fed’s rate cuts came early enough to stave off a recession. At the same time, renewed enthusiasm around artificial intelligence has supercharged demand for mega-cap tech names, driving sector-wide gains and prompting Wall Street forecasters to lift their outlooks for the S&P 500.

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Reflecting this bullish momentum, Goldman’s U.S. equity team recently lifted its target for the S&P 500, projecting a potential climb of another 2% to 6,800 points over the next three months.

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Still, investors aren’t ignoring risks. With signs that the U.S. labor market is gradually cooling, the upcoming corporate earnings season is expected to be closely watched for insights into how global tariffs are filtering into company results.

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Analysts expect earnings for the S&P 500 to rise 7.1% year-over-year in the third quarter, which would mark the smallest increase in two years, according to Bloomberg Intelligence data. This slowdown could test investor confidence in the durability of corporate profit growth.

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Despite their constructive near-term view, Goldman’s strategists highlighted the potential for shocks tied to either economic growth or interest rates. They stressed that such risks could create volatility, even as the overall market outlook remains positive.

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Regionally, the team is neutral across global markets, underscoring the importance of diversification. They reiterated that international exposure remains an important element of managing risk, especially as different economies progress through the cycle at varying speeds.

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Goldman Sachs’ latest call reinforces the idea that equities could continue to lead into year-end, powered by earnings resilience, Fed policy support, and optimism around technology growth. While risks remain from tariffs to rate shocks the bank’s strategists suggest that the combination of anchored recession fears and favorable market conditions makes a compelling case to stay invested.

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For investors, the message is clear: treat near-term dips as opportunities, keep an eye on upcoming earnings, and maintain a balanced, globally diversified approach.

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