Economic resilience reduces recession risk; Goldman Sachs says US stocks should be "bought on dips" through the end of the year.

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Based on the resilience of the U.S. economy, supportive valuation levels, and the Federal Reserve's dovish shift, Goldman Sachs strategists expect global stock markets to continue rising before the end of the year and advise investors to adopt a "buy the dip" strategy for equities.

In their latest report, the strategists upgraded their rating on U.S. stocks to overweight on a three-month horizon, citing strong earnings growth, the Federal Reserve’s accommodative policies absent a recession, and global fiscal easing. Goldman Sachs strategists believe that equities typically perform well during the late-cycle economic slowdown when policy support is strong.

This bullish stance echoes the current market optimism. Thanks to expectations that the Federal Reserve will cut interest rates in time to avoid a recession and the AI boom boosting tech giants, global stock markets have previously climbed to historical highs.

Meanwhile, Goldman Sachs downgraded its credit rating from neutral to underweight, but maintained a bullish 12-month outlook on equities. The firm believes that, while equity valuations may rise above current levels, this poses a constraint for credit.

Accommodative Policies Support Bullish Outlook

Goldman Sachs strategists believe that the current macro environment is favorable to the stock market. They state that, with recession risks under control, policy support is a key driver for market gains.

“Strong earnings growth, the Federal Reserve’s accommodative policies without triggering a recession, and global fiscal easing will continue to support stock markets. Given that recession risks are stable, we will buy equities on dips before year end.”

Earlier, Goldman Sachs’s U.S. strategists raised their three-month target for the S&P 500 Index to 6,800 points, indicating about 2% further upside.

Additionally, the team maintained its bullish outlook on equities for the next 12 months. For credit assets, Goldman Sachs believes that although they may face short-term pressures, over a 12-month horizon, the pessimism has eased due to relatively low recession risks and favorable supply-demand dynamics.

Risks Remain, Emphasis on Diversification

Despite issuing a short-term bullish recommendation, the Goldman Sachs team also warns that the market is not without risks. They note that there is still a risk of unexpected shocks to economic growth or interest rates in the short term, and investors should remain vigilant.

As the U.S. labor market begins to cool and global tariffs may have an impact, the upcoming corporate earnings season will provide important cues to the market. According to Bloomberg-compiled data, analysts expect S&P 500 component companies to see third-quarter earnings grow 7.1% year-on-year, which would be the smallest increase in two years and could test market expectations.

To address potential risks, the team emphasized the importance of diversification. The report reiterated its preference for international diversification in investments, and maintained a neutral stance between different regions, avoiding concentration of all risk exposures in a single market.

Risk Warning and DisclaimerMarkets have risks, and investments should be made cautiously. This article does not constitute personal investment advice and does not take into account any individual user’s specific investment objectives, financial situation, or needs. Users should consider whether any opinions, viewpoints, or conclusions expressed herein are appropriate for their particular circumstances. Investment decisions are made at your own risk. ```