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Global equities are expected to remain supported by corporate earnings growth, lighter investor positioning and lower valuations, despite weakening risk appetite and uncertainty over artificial intelligence (AI) investments and geopolitical developments, according to a report by Goldman Sachs.
The investment bank maintained its overweight stance on global equities over both three-month and 12-month periods, indicating that it expects markets to remain supported towards the end of the year despite near-term volatility. Goldman Sachs said its Risk Appetite Indicator (RAI), which tracks investors' willingness to take risks across financial markets, declined to minus 0.6. Its sentiment and positioning indicator also dropped to its lowest level since April 2025. The report said lower risk appetite and lighter investor positioning could improve the balance of risks for equity markets, although the indicator has not yet reached levels historically associated with stronger subsequent returns. "We remain OW equities over 3m/12m, as earnings support, lighter positioning and lower valuations should support equities into year-end," the report said. The report also highlighted a shift in market leadership, with defensive and value-oriented stocks outperforming companies more closely linked to the AI investment cycle. Semiconductor stocks have underperformed large technology companies as investors assess whether substantial spending on AI infrastructure will generate adequate returns. Goldman Sachs noted that Brent crude prices had fallen more than 16 per cent amid the possibility of easing tensions in the Middle East. Meanwhile, US equity markets witnessed a sharp sell-off, with the Nasdaq volatility index recording one of its largest weekly swings since March 2020. The bank said easing concerns over AI investments and clearer evidence of returns from such spending could help improve investor confidence. Lower energy prices and the possibility of reduced interest rate pressures could also provide support to markets. Goldman Sachs also maintained an overweight stance on bonds, particularly longer-duration government securities, as higher yields and moderating nominal economic growth could provide a cushion against volatility in equity markets. The report said uncertainty surrounding AI investments and geopolitical developments could continue to drive market volatility in the near term. However, earnings growth and relatively attractive valuations are expected to remain key factors supporting global equities. (ANI)
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