Goldman Strategists Upgrade Global Stocks on Earnings Boost

Goldman Sachs Group Inc. strategists have raised their three-month outlook on global stocks to overweight from neutral, citing a supportive earnings environment for markets trading near all-time highs. The move aligns the bank's short-term stance with its existing bullish view over a 12-month timeline. Christian Mueller-Glissmann, who leads the strategy team, noted that equity prices have become less demanding after higher oil prices and bond yields stalled the recent rally, while the profit outlook remains healthy.

In a recent note, Mueller-Glissmann observed that ongoing profit expansion continues to underpin equity valuations. He added that the recent pullback in valuations has improved the risk-reward profile heading into the upcoming third-quarter earnings season. The team expects stocks to surpass the high bar set by analysts, who project that S&P 500 companies will post a 25% jump in third-quarter profits compared with a year earlier. Bloomberg Intelligence data indicates this would be among the best rates of increase on record.

The shift at Goldman Sachs follows similar moves by other Wall Street strategists, including those at Bank of America Corp. and Barclays Plc, who have also turned more bullish on US stocks recently, citing a robust earnings outlook. To capitalize on this environment, the Goldman team recommends a "barbell strategy" that favors global technology names alongside selective rate-sensitive, bond-proxy stocks that have derated since the summer. Geographically, the strategists maintain an overweight position on Asia and the US, while remaining underweight on Europe.

Despite the positive equity view, the team identifies higher rates and energy prices as the main near-term risks to stocks. The upcoming US midterm elections could also introduce additional volatility. On fixed income, Goldman Sachs remains neutral on bonds over three months but has switched to an overweight stance over 12 months. The strategists argue that bond allocations are becoming more attractive for investors with longer horizons, believing that bonds should gradually move from a portfolio headwind to a hedge.