Goldman Sachs Strategist Sees Stock Gains Through 2026

Peter Oppenheimer, Goldman Sachs’ chief global equity strategist, has identified three key factors that create a constructive backdrop for equities through 2026. The most significant catalyst is the expectation that Federal Reserve interest rates will decline to approximately 3% by the middle of next year, representing a substantial easing from current restrictive levels. This monetary policy normalization is expected to reduce borrowing costs for corporations and consumers alike, creating a more favorable environment for business investment and economic activity.

Complementing the anticipated rate cuts, Oppenheimer points to ongoing economic growth as a second crucial pillar supporting stock market performance. The continued expansion of the U.S. economy provides the fundamental underpinning for corporate revenue growth and earnings stability. The third supportive factor identified by the Goldman Sachs strategist is “some moderation in the dollar,” which would alleviate pressure on multinational corporations that have faced headwinds from a strong U.S. currency in recent periods.

Despite the positive macroeconomic backdrop, Oppenheimer offers a measured perspective on potential returns, noting that “aggregate upside I think is limited because valuations are reasonably high.” This caution reflects current market conditions where major indices like the SPX have already priced in much of the optimistic economic scenario. The acknowledgment of elevated valuations serves as an important reminder to investors that the easy gains from the post-pandemic recovery phase may be behind us.

The Goldman Sachs strategist’s analysis suggests that while broad market indices may see constrained returns, selective opportunities will continue to emerge. Investors will need to be more discerning in their stock selection, focusing on companies with strong fundamentals, sustainable competitive advantages, and the ability to grow earnings even in a moderately expanding economy. This environment favors active management strategies and sector rotation approaches rather than passive index investing.

Oppenheimer emphasizes that the primary engine for equity performance through 2026 will be “profit and dividend growth” rather than multiple expansion. This represents a significant shift from previous market cycles where valuation increases contributed substantially to total returns. With valuations already at elevated levels, the burden of driving stock performance falls squarely on corporate earnings growth and capital return to shareholders.

The focus on dividend growth is particularly noteworthy in the current environment. As interest rates decline from their peaks, income-seeking investors may increasingly turn to dividend-paying stocks as an alternative to fixed income investments. Companies with strong cash flows and commitment to shareholder returns through dividends could see increased investor interest. This dynamic could create a virtuous cycle where dividend growth supports stock prices, which in turn attracts more capital to equities.

Oppenheimer’s analysis, delivered in an interview with Bloomberg Television, provides a balanced framework for investors navigating the coming years. While the Goldman Sachs strategist doesn’t anticipate explosive market gains, his outlook suggests a sustainable environment for equity appreciation driven by fundamental improvements in corporate profitability and capital returns. This perspective aligns with a maturing economic cycle where quality earnings growth and disciplined capital allocation become increasingly important differentiators for investment success.