Goldman Sachs believes that macro conditions look favorable for three sectors of the stock market.
In a new episode of the bank’s Exchanges podcast, Goldman managing director Ryan Hammond says market broadening has so far been the dominant theme in the markets this year as investors rotate out of their tech-heavy portfolios.
According to Hammond, Goldman economists are predicting stronger US economic growth this year, which could benefit stocks that have been largely ignored over the past few years.
“You can see that in the outperformance of non-US equities versus US equities, small caps doing better than large caps for the first time in a while, and cyclicals doing better than defensives. And our view is there’s a good macro reason for that broadening.
Our economists here at Goldman are forecasting that economic growth will accelerate in the first part of 2026 as you get a fading headwind from tariffs, building tailwinds from financial conditions and fiscal policy. All of that will lead to above trend, above consensus, accelerating economic growth. And that is good for cyclical parts of the market that, for a long time, have not really been the ones driving markets higher.”
Hammond names several sectors that could propel the S&P 500 to even greater heights this year as more investors pile into overlooked plays.
“And so, pockets of the market like consumer discretionary companies or transports or some of the industrial complex, those stocks are really driving markets higher.
And we think there’s probably room for that to continue if the macro environment continues to be friendly. So you have kind of this confluence of factors happening at the same time that lead to some of these rotations under the hood of the index.”
At time of writing, the S&P 500 is trading at 6,861.
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