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[Goldman Sachs: No Need to Wait for the Midterm Elections; a “Goldilocks” Scenario Could Ignite the Year-End Rally in US Equities Early]

Goldman Sachs believes the market may currently be overpricing the risks of stagflation and rising US Treasury yields. As the impact of tariffs subsides, energy prices potentially decline, and AI technology drives down costs, US inflationary pressures are expected to ease; meanwhile, although economic growth may slow, companies’ core earnings remain resilient. Under this “Goldilocks” scenario,AI investor enthusiasm could heat up again, and the year-end rally in US equities may begin without waiting until after the US midterm elections. Goldman Sachs Group partner Mark Wilson said recent market movements have already shown relevant signs,AI with related assets regaining favor among investors after several months of consolidation. Goldman Sachs economist Jan Hatzius believes upside risks to US economic growth are diminishing. As the effects of fiscal stimulus fade and gasoline prices and mortgage rates rise, economic growth may slow further, which would also limit central banks’ room to continue raising interest rates. Ben Snider, head of Goldman Sachs’ US strategy team, believes that despite temporary excess earnings in certain sectors, at least through 2027 year-end, companies’ core earnings may continue to grow strongly. Goldman Sachs therefore believes that if inflation continues to decline, economic growth slows moderately, and corporate earnings remain resilient, the market may gradually shift from its previous stagflation trade to a “Goldilocks” scenario.