What's happened
Despite concerns over AI-driven overvaluation, Goldman Sachs and Morgan Stanley forecast continued US stock growth in 2026. Goldman expects a 7% return, citing strong earnings and economic resilience, while Morgan Stanley predicts a 13% rise driven by global cyclical recovery and commodity demand. Experts warn of potential risks, including a possible market correction and shifts in investor confidence.
What's behind the headline?
The current optimism about US markets in 2026 is supported by multiple indicators, including rising copper prices and strong performances in Korean and US financial stocks, which suggest a broader global economic recovery. However, this optimism is tempered by warnings from prominent economists like El-Erian, who highlight risks such as a 'K-shaped' economic divergence and geopolitical tensions that could undermine growth.
Goldman Sachs' optimistic forecast of a 7% return hinges on continued earnings growth and a resilient economy, but it acknowledges elevated valuations. Conversely, some analysts warn that the AI sector's recent gains may be unsustainable, citing signs of fatigue in top AI stocks like Nvidia and Meta, and the potential for a broader market correction if confidence wanes.
The contrasting views reflect a market at a crossroads: while fundamentals suggest growth, the specter of overvaluation, geopolitical risks, and sector-specific vulnerabilities could trigger volatility. Investors are advised to focus on fundamentals and diversify, especially outside of overhyped sectors like AI, to mitigate potential downturns. The year 2026 will likely see increased market differentiation, with some sectors outperforming while others falter amid shifting investor sentiment.
What the papers say
Business Insider UK reports that Goldman Sachs remains optimistic about US economic resilience, citing strong earnings and global capital flows despite political turmoil. They also note that the market's recent highs are not indicative of a bubble, with valuations justified by profit margins in tech giants. Meanwhile, El-Erian warns that structural shifts, such as a widening income gap and geopolitical tensions, could destabilize the market, emphasizing the need for cautious positioning. The Guardian highlights concerns about overvalued tech stocks and warns of an 'AI bubble,' with experts cautioning that a correction could impact broader markets. The divergence in perspectives underscores the complexity of the current economic outlook, with some analysts emphasizing resilience and others warning of imminent risks.
How we got here
The recent surge in US stock markets in 2025 was driven by technological advancements, particularly in AI, and strong earnings from major tech firms. Despite warnings of overvaluation and fears of an 'AI bubble,' analysts note that the market's fundamentals remain solid, supported by robust economic indicators and global growth signals. The year 2026 is seen as a period of transition, with some experts warning of potential volatility amid structural shifts in markets and geopolitics.
Go deeper
Common question
-
Are US Stocks Expected to Grow in 2026?
Investors and market watchers are eager to understand what 2026 holds for US stocks. While some experts forecast continued growth driven by economic resilience and global recovery, others warn of potential risks like overvaluation and geopolitical tensions. In this guide, we explore what the major financial institutions predict, the key risks to watch, and how emerging trends like AI might influence the markets this year.
-
How Are Global Political and Economic Shifts Affecting Us in 2026?
The world is experiencing rapid political upheavals and economic changes that impact markets, investments, and daily life. From conflicts influencing oil prices to shifts in US and UK economies, understanding these developments is crucial. Below, we explore key questions about the current global landscape and what they mean for you.
More on these topics