Global Market "Major Shift": "Physical" Returns, "Technology" Diverges

If you are still blindly believing the narrative of "U.S. tech stocks dominate," it's time to wake up. Goldman Sachs' latest global strategy report reveals a paradigm shift underway: **Although the bull market has not ended, the driving engine has completely changed.** **According to Chasewind Trading Desk, Goldman Sachs analyst Peter Oppenheimer and his team published a research report showing that the long-standing era when "financial assets" outperformed "physical assets" is reversing,** with the U.S. market set to lag behind other major global markets for the first time in 2025, and emerging markets making a strong comeback. The global market is in a clear late-cycle "optimistic" phase, but deep internal divergences are unfolding: > Asset Rotation: Funds are moving away from overcrowded U.S. tech stocks toward emerging markets (EM), commodities, and "old economy" value stocks. > > AI Demystification and Divergence: Although AI capital expenditure will reach $659 billion, ROI anxiety is beginning to spread; the Mag7 no longer rise and fall together, with sharply divergent performances internally. > > Software Crisis: The rise of AI agents is seen as a disruption to traditional SaaS models, leading to a sharp correction in software sector valuations. > > Physical Assets Rule: Growth in the virtual world is now constrained by the physical world (energy, data centers), resulting in a surge in capital expenditure (Capex) in utilities and capital-intensive industries, boosting the value of physical assets. ## The Global Bull Market Continues, but U.S. Stocks Are No Longer the Sole Protagonist A historic shift is quietly taking place in 2025. Although the S&P 500 index remains robust, the U.S. market lags behind other major markets in both local currencies and U.S. dollars. Data shows that the European STOXX 600, Japan's Topix, and MSCI Asia Pacific (excluding Japan) have all outperformed the S&P 500. More striking is the "comeback" of emerging markets. Long underperforming, emerging markets are being revalued versus developed markets, with the MSCI Emerging Markets Index's performance versus developed markets rising from 100 to almost 120 since the start of 2025. Goldman Sachs analysts believe this trend is driven by a combination of macro and micro improvements, and relative valuations remain attractive, so the momentum is expected to continue. ## Markets Ignore Policy Uncertainty, Profit Growth Remains Strong Despite frequent geopolitical incidents and rising policy uncertainty, the stock market displays remarkable "complacency," almost completely ignoring these risks. This resilience is mainly due to strong fundamentals: Global economic confidence is improving, with cyclical sectors outperforming defensive sectors. U.S. corporate earnings growth remains robust, up over 12% this quarter, beating consensus by 5 percentage points and achieving double-digit growth for five consecutive quarters. This round of growth is no longer solely dominated by large tech stocks. The median year-over-year growth of S&P 500 constituents is 9%, and 59% of companies have outperformed expectations. Analysts have unusually upgraded their full-year 2026 earnings forecasts in the first quarter—a trend particularly pronounced in emerging markets. ## AI Capital Expenditure Frenzy and Internal Splits Among "The Magnificent Seven" This is the most important warning sign for tech investors: the AI wave is shifting from "universal prosperity" to "brutal differentiation." Market expectations for the capital expenditures of ultra-large AI enterprises in 2026 have risen to $659 billion, a 60% increase over 2025. Despite the absolute value increase, growth is projected to slow compared to last year. Such a massive investment has raised investor doubts about whether it can generate sufficient returns. This has slowed the rate of returns for tech stocks, and the annual return rates of "The Magnificent Seven" have been declining year by year: 75% in 2023, down to about 50% in 2024, and less than 25% in 2025. Moreover, the "Magnificent Seven" no longer move in lockstep. In 2025, Google's return rate soared to about 66%, contributing 15% to the total S&P return; Microsoft, Meta, and Tesla only posted low double-digit returns; Apple and Amazon fell to single digits, trailing the broader market. The correlation of stock prices among these giants has dropped sharply. ## The "Darkest Hour" for the Software Sector: Backlash From AI The wave of AI innovation is not only causing differentiation among ultra-large enterprises, but is also posing a disruptive threat to existing tech companies. The launch of new intelligent agent platforms like Anthropic's Claude Cowork and OpenAI's Frontier has sparked concerns about the disruption of other tech business models, especially in software. Heading into 2026, market expectations for the software sector are at a 20-year high, with consensus forecasting a two-year forward revenue growth rate of 15%, more than twice the 6% expected median for S&P 500 companies. However, last week the U.S. software sector plunged by 15% (nearly 30% off its September peak), reflecting a sharp downward revision of investor expectations for record-high profit margins and growth. This valuation reset marks a fundamental reassessment of growth prospects for the software sector. ## "Physical" Revival: The Resurgence of the Old Economy A profound shift is underway: for the first time in 25 years since the commercialization of the Internet, tech growth prospects now significantly depend on physical assets—data centers and energy supplies. As ultra-large enterprise capital expenditures surge, that spending is spilling over into other sectors, especially those like utilities building infrastructure, with the future growth of dominant tech giants now dependent on such infrastructure. Data shows that the Capex-to-sales ratios for utilities, telecoms, and commodity producers in developed markets are all on the rise, while these "old economy" industries have been starved of Capex since the financial crisis due to overcapacity and historically low returns. AI infrastructure investment, combined with renewed defense spending, is re-igniting the investment returns of many long-underperforming physical assets, while investors are now worried that tech returns are slowing down from record highs. This has led to a significant drop in valuation premiums for capital-light companies compared to capital-intensive companies. ## Value Stocks Make a Comeback: From Value Traps to Value Creators The reassessment of growth rates in some tech areas, combined with persistent inflation and higher real interest rates, has revived investor interest in the long-neglected opportunities in value stocks. These stocks have long been seen as "value traps," but some are successfully transitioning into "value creators," generating higher cash flows and returning more capital to shareholders through dividends and buybacks. The 12-month forward PE premium of growth stocks to value stocks has declined in the U.S., Europe, Japan, emerging markets, and globally. Since early 2025, the performance patterns of financial assets versus physical assets have sharply reversed: gold, emerging markets, Topix, industrial metals, and value stocks have outperformed, in stark contrast to the Nasdaq, S&P 500, and tech-stock-dominated patterns from post-financial crisis to the end of the pandemic. ## The Advent of a Diversified Allocation Era From the financial crisis to the end of the pandemic, an era characterized by exceptional tech growth and zero interest rate policies led to a record gap in returns between financial and physical assets. Abundant liquidity and historically low capital costs meant the longest-duration investments—Nasdaq, S&P 500, and tech stocks—performed the best. From 2009 to 2020, the Nasdaq rose over 900%, while prices in the real economy—commodities, wages, GDP—grew limitedly. Today, the landscape is markedly different. While U.S. corporate earnings growth remains strong—up 12% this quarter, beating consensus by 5 percentage points, with S&P median companies up 9% and 59% beating expectations—the sources of growth are expanding. More importantly, full-year 2026 earnings forecasts have unusually been raised in the first quarter, with upside surprises larger in emerging markets. Goldman Sachs believes equities may remain the top-performing asset class, but the drivers and return opportunities are fundamentally broadening. While overall index returns may slow, there are increasing opportunities for diversification, offering better prospects for risk-adjusted returns and alpha generation. Investors need to rethink long-established allocation inertia and achieve broader diversification across geography, sectors, and style factors to seize the opportunities of this epochal market transformation. ~~~~~~~~~~~~~~~~~~~~~~~~ The above wonderful content is from [Chasewind Trading Desk](https://mp.weixin.qq.com/s/uua05g5qk-N2J7h91pyqxQ). For a more detailed analysis, including real-time interpretations and frontline research, please join the [**Chasewind Trading Desk Annual Membership**](https://wallstreetcn.com/shop/item/1000309) [](https://wallstreetcn.com/shop/item/1000309) Risk Warning and Disclaimer The market bears risks, and investment should be prudent. This article does not constitute personal investment advice, nor does it take into account the unique investment objectives, financial status, or needs of individual users. Users should consider whether any opinions, viewpoints, or conclusions in this article suit their particular circumstances. 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