Global Stocks Poised for Gains but Priced for Perfection, Warns Goldman Sachs
As 2025 begins, global stock markets enjoy a favorable backdrop, but they now appear “priced for perfection,” according to Goldman Sachs, raising the likelihood of a potential correction.
Analysts at Goldman Sachs noted in a January 9 report that concerns about a hard landing driven by rising inflation and interest rates, prevalent throughout 2022 and 2023, have largely dissipated. The bank remains optimistic about positive global growth through 2025 and beyond, supported by lower interest rates—a combination historically associated with robust equity returns.
Despite this optimism, Goldman highlighted three key factors complicating the outlook for equities in 2025:
- Rapid Price Gains: The recent surge in stock prices has already factored in much of the anticipated positive news on economic growth.
- Valuation Concerns: Elevated valuations are expected to cap forward returns.
- Market Concentration: High levels of market concentration pose increased portfolio risks. Dominance by the U.S., the technology sector, and a handful of mega-cap stocks—where the five largest U.S. stocks comprise roughly a quarter of the index—heightens vulnerabilities.
These factors, particularly evident in the U.S., leave equities in a precarious position. The S&P 500 surged 23% in 2024, following a 24% gain in 2023, further amplifying valuation concerns.
While Goldman expects equity markets to progress throughout 2025, driven primarily by earnings growth, they caution that stocks are increasingly exposed to potential corrections. Such corrections could be triggered by rising bond yields or disappointing economic or earnings data.
