Goldman Sachs Equity Strategy 2026 Outlook: Tech Tonic
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Goldman Sachs global equity strategist Peter Oppenheimer highlights that US equities have delivered sustained outperformance over global markets for years, driven heavily by the technology sector. However, this dominance is showing signs of fatigue. Between early 2025 and early 2026, the S&P 500 began lagging the STOXX Europe 600, Topix, and MSCI AC Asia Pacific ex-Japan on a USD price-return basis, with its relative performance against MSCI World ex-US sitting in the bottom historical decile.
Technology's weight in the US market now exceeds 40%, compared with roughly 10% in global ex-US markets. The top ten US companies command approximately $25.6 trillion in market capitalisation, surpassing China's GDP of $18.8 trillion. Global equity valuations sit at 20-year highs, with the S&P 500 trading at 21.6x forward earnings versus Europe at 15.6x and China at 12.4x.
AI hyperscaler capital expenditure has surged from $158 billion in 2022 to a projected $792 billion in 2026, with spend approaching 100% of operating cash flow. Meanwhile, software valuations have compressed sharply, with the IGV index falling from approximately 45x to 25x forward earnings alongside declining sales growth expectations. Cyclical sectors have outperformed defensives across all major regions since early 2025, and the valuation premium of non-capital-intensive over capital-intensive stocks has narrowed from roughly 45% to 5%, suggesting a potential turning point for market leadership.