America is Still No. 1, Says Goldman Sachs
Despite some minor risks, the American economy and markets are far from being in decline, according to the investment bank.
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USA! USA! USA!
No, that’s not the raucous chanting of World Cup fans (just wait until June), it’s Goldman Sachs’ outlook for 2026. Concerns from a top-heavy stock market to the White House’s supposed threat to the Federal Reserve’s independence and foreign equities outpacing domestic returns are relatively insignificant to America’s continued dominance, the Wall Street stalwart says.
“People are underestimating US resilience,” said Goldman CIO Sharmin Mossavar-Rahmani. “In spite of all the headlines that you read about — is America on the decline, etc. — we want to make a very strong stand and say no, that is not the case.”
For plenty of advisors and their allocation, that might just mean continuing what you were doing last year. “Portfolios should be significantly overweight in US assets,” Mossavar-Rahmani said at a press event last week.
Independence Day
Political risk is a frequent concern. President Trump has been vocal about wanting lower inflation and interest rates and has suggested firing Fed Chair Jerome Powell if it would help achieve that goal. And on Sunday, Powell said that the Department of Justice began investigating him over testimony he gave to Congress last summer regarding the central bank’s building renovation, which he argues is really an attempt to weaken Fed independence.
While the rhetoric is aggressive and certain actions could increase short-term volatility, Goldman views the pressure as familiar rather than alarming. “The fact that presidents want lower rates is not that unusual,” Mossavar-Rahmani said, adding that Goldman does not believe the White House poses a threat to monetary policy independence. Last year, Trump attempted to fire a member of the Federal Trade Commission and a Federal Reserve governor. Lawyers, whomGoldman consulted, expect the Supreme Court to side with Trump in the FTC case, but not in the Fed matter, underscoring the central bank’s unique independence.
Proof Is in the Earnings
Goldman’s portfolio guidance comes even as some investors look overseas for opportunity. International equities jumped 32% last year, while US stocks gained a still-impressive but lower 18%, according to Goldman data. But returns alone don’t tell the full story:
- Earnings growth in non-US developed markets rose just 1%, compared with 12% in the US. In China, earnings declined despite equity returns climbing 31%.
- The S&P 500 is concentrated, with the 10 largest companies accounting for 41% of the index. Still, those firms boast median profit margins of 29%.
“If you don’t have the earnings to support any market move, it’s not going to last,” Mossavar-Rahmani said.
USA, A-OK. Geopolitical risks — from Ukraine and the Middle East to India-Pakistan tensions — remain a wildcard. Goldman isn’t too concerned, though, said Brett Nelson, head of tactical asset allocation at Goldman. “We do think they could be sources of volatility, but we’re only putting 25% odds on the risk of them being disruptive enough to actually result in a recession in the US.”
