Global Equities to Rely on Earnings Growth Amid Weakening Risk Appetite, Says Goldman Sachs

Global equities are expected to remain supported by corporate earnings growth, lighter investor positioning, and lower valuations, according to a recent report by Goldman Sachs. This outlook persists despite a weakening investor risk appetite and ongoing uncertainties regarding artificial intelligence (AI) investments and geopolitical developments.

The investment bank has maintained its overweight stance on global equities over both three-month and 12-month periods. According to the report, these factors indicate that markets are expected to remain supported towards the end of the year, even in the face of near-term volatility.

Goldman Sachs reported that its Risk Appetite Indicator, which tracks investors' willingness to take risks across financial markets, declined to minus 0.6. Additionally, its sentiment and positioning indicator dropped to its lowest level since April 2025. The report noted that while lower risk appetite and lighter investor positioning could improve the balance of risks for equity markets, the indicator has not yet reached levels historically associated with stronger subsequent returns.

The report highlighted a notable shift in market leadership, with defensive and value-oriented stocks outperforming companies more closely tied to the AI investment cycle. Semiconductor stocks underperformed large technology companies as investors evaluated whether substantial spending on AI infrastructure will generate adequate returns.

In commodities and regional markets, Goldman Sachs noted that Brent crude prices fell by more than 16 per cent amid the possibility of easing tensions in the Middle East. Meanwhile, US equity markets experienced a sharp sell-off, with the Nasdaq volatility index recording one of its largest weekly swings since March 2020.

The bank indicated that easing concerns over AI investments, clearer evidence of returns from such spending, lower energy prices, and the possibility of reduced interest rate pressures could help improve investor confidence and provide further support to markets.

Alongside its equity outlook, Goldman Sachs maintained an overweight stance on bonds, particularly longer-duration government securities. The report stated that higher yields and moderating nominal economic growth could provide a cushion against volatility in equity markets, while acknowledging that AI uncertainty and geopolitical developments may continue to drive near-term market fluctuations.

"The findings from Goldman Sachs highlight a transitional phase in the broader financial markets, where investors are increasingly prioritizing fundamental earnings and valuations over speculative tech growth. For the startup and venture capital ecosystem, this shifting sentiment toward AI infrastructure returns serves as a crucial reminder. Founders must focus on clear, measurable profitability and sustainable business models rather than relying solely on high-growth narratives to attract institutional capital in a volatile macroeconomic environment." — Dr. Shishir Gupta, Founder & CEO, StartupLanes