Goldman Sachs: U.S. stocks may rebound in the last two weeks of the year; 2026 is designated as the "big year for stock picking," with opportunities not in AI but in cyclicals.

Goldman Sachs pointed out in its latest report that as U.S. economic growth is expected to accelerate in 2026, the U.S. stock market will usher in a wave of profit boom, and **the core investment opportunities will shift from AI giants to cyclical sectors**. Meanwhile, pricing signals from the derivatives market indicate that the correlation among U.S. stocks will hit a historic low in 2026, **meaning that the year will be dominated by "stock-picking" strategies**. Goldman Sachs analysts emphasized that signs of a market style shift have already appeared, as cyclical stocks have outperformed defensive stocks for 14 consecutive trading days, marking the longest winning streak in more than 15 years. Although macro optimism is rising, current market pricing only reflects growth expectations of about 2%, much lower than Goldman’s forecast of 2.5%. This means investors have yet to fully price in the upside potential brought by economic acceleration in 2026. Against this long-term backdrop, the short-term trend of U.S. stocks is also worth noting. Although the S&P 500 index has fallen for four straight days recently due to concerns over AI demand, Goldman Sachs points out that the last two weeks of the year have historically been an “overwhelmingly positive seasonal period.” **Historical data shows that the average return from December 17 to December 31 is 1.77%, giving room for a year-end stock market rebound.** Through an in-depth interpretation of options markets and macro data, **Goldman Sachs believes that although AI is dominating the headlines, its actual boost to earnings across industries is small compared to the coming macroeconomic boom.** As tariff pressures ease and the economy speeds up, S&P 500 earnings per share (EPS) are expected to grow by 12% next year, and the market is facing a critical structural adjustment. ## **Cyclical sector earnings growth to lead in 2026** Goldman Sachs makes it clear in the report that accelerated economic growth in 2026 will maximize cyclical industries’ EPS growth, including industrials, materials, and consumer discretionary sectors. In contrast, technology stocks represented by the "Magnificent Seven" currently account for about a third of the S&P 500’s weight, and have seen staggering gains this year from stocks like Nvidia, but Goldman Sachs has previously warned that the market may have already priced in most of the potential gains from AI. Specifically, Goldman Sachs predicts that real estate companies’ EPS growth will jump from 5% this year to 15% next year; consumer discretionary growth will increase from 3% to 7%; and industrial firms will see a major rebound, with EPS growth accelerating from 4% to 15%. In sharp contrast to the robust bounce in cyclical stocks, Goldman Sachs expects the EPS growth rate for information technology companies to slow, gently declining from 26% in 2025 to 24% in 2026. Analysts believe that despite widespread optimism in client discussions, the market is not fully prepared for such a cyclical rebound. ## **Extremely low correlation signals a “stock-pickers’ market”** Beyond the macro sector rotation, John Marshall, head of derivatives research at Goldman Sachs, analyzed the one-year at-the-money forward contracts of the S&P 500 and Nasdaq 100, and noted that investors expect individual stock correlations in 2026 to be lower than any period on record. John Marshall wrote to clients that, looking ahead to 2026, investors only expect a 23% correlation among S&P 500 constituents—an exceptionally low level. This means the movements of index components will diverge, while consensus index options selling strategies and fundamental themes like AI will exert opposite effects on different stocks (being a headwind for some and a tailwind for others), jointly supporting this trend. This means the market performance in 2026 will be highly dispersed, and simple index buying strategies may fail; precise stock selection will be the key to profits. ## Year-end seasonal rebound window opens, last two weeks’ average return reaches 1.77% As for the short-term market, the Goldman Sachs analysis team led by Gail Hafif noted that U.S. stocks are entering a highly favorable seasonal window. Although the S&P 500 index has suffered recently and is still 2.6% below its historical high, **the market continues to debate whether the AI frenzy has led to a speculative bubble, but historical data supports a year-end rally.** Analysts pointed out that although December’s average full-month gain is 1.98%, just the period from December 17 to December 31 alone averages a 1.77% return. While dramatic surges are not expected, there is still upward room at the current market position, offering investors potential trading opportunities in the last two weeks of the year. 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