Global market strategy: resilient growth and uncertain macro conditions Report Interpretation

Overview

This Global Weekly Kickstart reviews macro releases, cross-asset performance, equity earnings, valuations, styles, flows and sector positioning. Its central message is that resilient growth and earnings remain supportive, especially for Europe, but higher yields, energy disruption and political uncertainty keep the macro outlook unsettled.

Core views

Global markets were broadly unchanged during the week. Europe underperformed, declining 1% amid higher energy prices and ongoing political uncertainty, while Japan rebounded 1.5%. Brent crude gained about 7% week on week and moved back above $95/bbl. Energy rose 2.3% and Financials 1.1%, making them the leading sectors. Against this mixed market backdrop, Goldman Sachs says Q3 earnings momentum remains robust, with EPS estimates continuing to be revised higher across regions. The report’s featured regional view is “Strong Micro Meets Challenging Macro” for Europe. European equities have performed well in 2026 because earnings have been strong and economic growth resilient. Goldman Sachs expects STOXX Europe EPS to rise 15% in 2026, then slow to mid-single-digit growth in 2027 as energy-related tailwinds fade. It nevertheless sees earnings risks as skewed to the upside, particularly for Technology, Industrials, Utilities and Financials, which it identifies as benefiting from structural tailwinds. Goldman Sachs argues that Europe offers value and diversification: European equities trade broadly in line with historical averages while generating healthier cash flow than US equities. The institution remains constructive on the region and favours a balanced combination of cyclicals and defensives. Its preferred exposures are Technology, Banks, Defence, Telecoms and Renewables, as well as the HALO trade expressed as GSSTCAPI versus GSSTCAPL. The constructive view is explicitly conditional on managing three risks: higher bond yields, energy-supply disruptions, and political and fiscal uncertainty. The macro dashboard points to a slower but still positive global growth profile. Goldman Sachs forecasts world real GDP growth of 2.6% in 2026 and 2.5% in 2027, versus consensus estimates of 2.8% and 2.7%, respectively. Its 2026 forecasts include 2.1% for the US, 0.8% for the euro area, 0.8% for Japan and 4.6% for China. The week’s scheduled data include US CPI and PPI; European industrial production, inflation, the ECB deposit rate and UK GDP; Japanese GDP, employment and corporate goods prices; and mainland China trade, inflation and credit data alongside Taiwan and Thailand releases. Earnings expectations remain a major support. Consensus estimates show 2026 EPS growth of 33.9% for MSCI AC World, 31.1% for the S&P 500, 17.4% for STOXX 600 and 17.9% for TOPIX. Information Technology has the strongest 2026 consensus EPS growth among listed global sectors at 86.1%, followed by Energy at 69.8%, Materials at 50.3% and Communication Services at 37.8%. For 2027, the estimates generally slow: MSCI AC World EPS growth is 15.7%, S&P 500 14.9%, STOXX 600 9.2% and TOPIX 11.5%, while Energy EPS is projected to decline 11.5% as the energy tailwind fades. The report also frames risk appetite through proprietary market indicators. Its GS Bull/Bear Market Indicator stands at the 68th percentile, with a Shiller P/E of 41.2 at the 98th percentile, unemployment at the 82nd percentile, and the 0–6-quarter yield curve at the 71st percentile. The GS Risk Appetite Indicator is based on 27 cross-asset pair trades measured by Z-scores relative to the prior two years. These indicators are used alongside forward P/E comparisons, equity-risk-premium measures, flows, implied volatility, skew and cross-asset correlations to assess the market backdrop rather than to make a company-specific call.

Analysis framework

Goldman Sachs combines macro forecasts and consensus comparisons with weekly global market, sector and cross-asset performance. It then evaluates earnings growth and estimate revisions, forward valuation measures, style and sector relative performance, positioning and fund flows, and proprietary sentiment indicators to support its regional and sector-allocation conclusions.

Methodology notes

• Industry AnalysisVolume-price decomposition

  Sales growth, EPS growth and net-margin forecasts by market and sector

  The report separates revenue growth, earnings growth and margins to show which sectors and regions are expected to drive profits.

• Valuation methodsP/E and PEG Valuation

  12-month and 24-month forward P/E comparisons against history

  Forward P/E measures are used to compare market, regional and style valuations with their historical ranges.

• Quantitative, Factor, and Portfolio TheoryStyle factor analysis

  Value versus growth, small versus large, cyclicals versus defensives, and momentum versus market comparisons

  The report tracks style-factor returns and valuation premia to frame relative equity positioning.

• Other

  GS Risk Appetite Indicator based on 27 cross-asset pair trades and two-year Z-scores

  The indicator standardizes recent cross-asset pair-trade performance against its two-year history to gauge risk appetite.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• European equities

  Goldman Sachs remains constructive on the region, citing resilient growth, strong earnings, relative value and diversification.

  Strengths

  Trades broadly in line with historical averages and generates healthier cash flow than US equities; STOXX Europe EPS is expected to grow 15% in 2026.

  Weaknesses

  EPS growth is expected to moderate to mid-single digits in 2027 as energy tailwinds fade.

  Comparison

  The report says Europe offers healthier cash flow than US equities.

  Risks

  Higher bond yields, energy supply disruptions, and political and fiscal uncertainty.

• Technology, Banks, Defence, Telecoms and Renewables

  Preferred European sector exposures.

  Strengths

  Technology, Industrials, Utilities and Financials are identified as sectors with structural tailwinds; Banks are among the preferred exposures.

  Comparison

  Preferred within a balanced cyclicals-and-defensives mix.

  Risks

  Subject to the broader yield, energy and political risks identified for Europe.

Key data

• Europe weekly performance-1%Europe underperformed amid higher energy prices and political uncertainty.
• Japan weekly performance+1.5%Japan rebounded during the week.
• Brent crudeAbove $95/bbl; about +7% week on weekHigher energy prices supported Energy-sector performance.
• STOXX Europe EPS growth forecast15% in 2026Expected to moderate to mid-single digits in 2027.
• World real GDP growth forecast2.6% in 2026; 2.5% in 2027Goldman Sachs forecasts versus consensus of 2.8% and 2.7%.
• MSCI AC World EPS growth33.9% in 2026; 15.7% in 2027Consensus estimates in USD.
• GS Bull/Bear Market Indicator68th percentileIts components include a 41.2 Shiller P/E at the 98th percentile.

Impact & implications

The report views strong earnings and attractive European relative value as support for a constructive Europe allocation, but recommends balancing cyclicals with defensives because higher yields, energy disruption and political or fiscal uncertainty could challenge the outlook. Technology, Banks, Defence, Telecoms and Renewables are the stated preferred European exposures.

Risks

• Higher bond yields could pressure European equities.
• Energy-supply disruptions are a key risk to the European outlook.
• Political and fiscal uncertainty remains a material risk for Europe.

What to watch

• US CPI and PPI reports.
• European industrial production, inflation, the ECB deposit facility rate and UK monthly GDP.
• Japan’s revised Q2 GDP, employment data and corporate goods price index.
• Mainland China trade, inflation and credit data, plus Taiwan trade and CPI and Thailand CPI.
• The durability of earnings revisions and the pace at which energy tailwinds fade in 2027.