Goldman Sachs: The US stock market may see a rebound in the last two weeks of the year, setting the tone for 2026 as a "stock-picking year," with opportunities not in AI but in cycles

Goldman Sachs pointed out in its latest report that as the growth expectations for the U.S. economy accelerate in 2026, the U.S. stock market will usher in a wave of profit prosperity, with the core of investment opportunities shifting from artificial intelligence giants to cyclical sectors.

At the same time, pricing signals in the derivatives market indicate that the correlation among U.S. stocks will drop to a historical low in 2026, marking that the year will be primarily dominated by a "stock-picking" strategy.

Goldman Sachs analysts emphasized that signs of a market style switch have already emerged, with cyclical stocks outperforming defensive stocks for 14 consecutive trading days, setting a record for the longest winning streak in over 15 years. Despite the warming macro optimism, the current market pricing still reflects growth expectations of nearly 2%, far below Goldman Sachs' forecast of 2.5%, indicating that investors have not fully priced in the upside potential brought by the economic acceleration in 2026.

Against this long-term outlook, the short-term trends of the U.S. stock market are also worth noting. Although the S&P 500 index has fallen for four consecutive trading days due to market concerns over AI demand, Goldman Sachs pointed out that the last two weeks of the year are historically an "overwhelmingly positive seasonal period." Historical data shows that the average return from December 17 to 31 is 1.77%, providing room for the stock market to rebound before the year ends.

Through an in-depth interpretation of the options market and macro data, Goldman Sachs believes that while AI dominates current headlines, its actual impact on earnings across various industries is relatively minor compared to the upcoming macroeconomic boom. With the easing of tariff pressures and a comprehensive acceleration of the economy, the earnings per share (EPS) of the S&P 500 index is expected to grow by 12% next year, and the market's main line is facing a critical structural adjustment.

Cyclical Sector Earnings Growth Will Lead in 2026

Goldman Sachs clearly stated in the report that the acceleration of economic growth in 2026 will significantly boost the earnings growth of cyclical industries, including industrials, materials, and consumer discretionary sectors. In contrast, technology stocks represented by the "seven giants," while currently accounting for about one-third of the S&P 500 index's weight and seeing remarkable gains this year from stocks like Nvidia, have been warned by Goldman Sachs that the market may have already priced in most of the potential benefits brought by AI.

In terms of specific data, Goldman Sachs predicts that the earnings growth of real estate companies will leap from 5% this year to 15% next year; the growth of consumer discretionary is expected to rise from 3% to 7%; and industrial companies will also see a significant rebound, with their earnings growth expected to accelerate from 4% to 15%.

In stark contrast to the strong rebound of cyclical stocks, Goldman Sachs expects the earnings growth of information technology companies to slow down, slightly retreating from 26% in 2025 to 24% in 2026. Analysts believe that although there is a general optimism in customer dialogues, the market is currently not fully prepared for this cyclical rebound.

Extremely Low Correlation Indicates a "Stock Picker's Market"

In addition to the macro-level industry rotation, John Marshall, head of derivatives research at Goldman Sachs, pointed out through the interpretation of one-year at-the-money forward contracts on the S&P 500 index and the Nasdaq 100 index that investors expect the correlation among individual stocks in 2026 to be lower than at any time on record John Marshall stated in a report to clients that looking ahead to 2026, investors expect the correlation among S&P 500 index constituents to be only 23%. This extremely low correlation means that the movements of major index constituents will no longer converge, and the consistent selling strategy of index options, along with the opposing effects of fundamental themes like AI on different stocks (acting as resistance for some stocks and tailwinds for others), are driving this trend.

This indicates that market performance in 2026 will be highly differentiated, and a simple buy-and-hold strategy for the index may fail; precise stock selection will become the key to profitability.

Year-end seasonal rebound window opens, with average return rate of 1.77% in the last two weeks

In terms of short-term market trends, the Goldman Sachs analysis team led by Gail Hafif pointed out that U.S. stocks are entering a seasonally favorable time window. Although the S&P 500 index has recently faced setbacks, still 2.6% away from its historical high, and the market is still debating whether the AI boom has led to a speculative bubble, historical data supports the view of a rise at year-end.

Analysts emphasized that while the average increase for the entire month of December is 1.98%, the average return rate from December 17 to December 31 reaches 1.77%. The Goldman Sachs team stated that while a dramatic surge may not necessarily occur, the current market position indeed has upward potential, providing investors with potential trading opportunities in the last two weeks of the year