Goldman Sees Stock Rebound Setup but Warns of 2027 Inflation Risk

Goldman Sachs sees a possible late-year rebound in U.S. stocks but warns that rising global manufacturing costs may rekindle inflation in the first quarter of 2027.

Global equity valuations have returned to near their 35-year average, and selling pressure is close to running out, Goldman said. The bank sees those conditions as supportive of a year-end rally after a sharp sell-off and reductions in hedge fund exposure. The setup adds to earlier Wall Street calls for year-end stock gains.

Hedge funds’ net exposure to artificial intelligence stocks recently turned underweight for the first time since 2023. JPMorgan has urged investors to buy during market dips.

The inflation figures complicate that outlook. Import-price inflation in global manufacturing has reached an annualized six-month pace of about 24%, above its peak during the pandemic. Global producer prices are rising at an annualized rate of about 11%.

Goldman said it typically takes six to 12 months for upstream cost increases to reach consumers, putting added inflation pressure in the first quarter of 2027. The bank warned this could keep the Federal Reserve on a restrictive footing. It also cautioned that a year-end rally could ease financial conditions, weaken the case for the Fed to hold policy steady and use up some potential future gains.