PremiumGoldman Says The Market Is Under-Valuing 'Growth' As 'Broadening' Continues
The broadening in the market is helping US large-cap mutual funds outperform their benchmarks YTD whereas Equity L/S HF’s are up 1%.
Equity hedge funds have returned 1% YTD (as of February 19, 2026)
Hedge fund performance estimate represents a weighted average of fund performance derived from aggregated Goldman Sachs Prime Services client positions for an anonymized basket of Equity Long/Short funds.
Source: FactSet, Goldman Sachs FICC and Equities, Goldman Sachs Global Investment Research
57% of large-cap mutual funds are outperforming their benchmarks
Source: Goldman Sachs Global Investment Research
Net cash position amongst Mutual funds are now close to record lows at 1.1% of assets.
Mutual fund and equity hedge fund exposure to equities
Aggregated hedge fund data from Goldman Sachs Prime Services as of 19-Feb-26; should not be relied upon as a comprehensive view of the market
Source: ICI, Goldman Sachs Prime Services, Goldman Sachs Global Investment Research
Industrials and Healthcare are two of the most OW sectors amongst HF’s and Mutual funds.
Hedge fund vs. mutual fund sector positions
Source: Goldman Sachs Global Investment Research
"Shared favorites" have outperformed the S&P 500 YTD
Source: Goldman Sachs Global Investment Research
As Goldman's Jacob Maelstrom points out in his latest note, markets now pricing growth below our forecast as we’ve seen Cyclicals such as Financials trade weak and Staples within Defensives continuing to outperform.
Forward-looking manufacturing surveys are looking stronger
Source: Haver Analytics, Goldman Sachs Global Investment Research
Growth pricing still below our forecasts
Source: Goldman Sachs Global Investment Research
Old-economy cyclicals have performed well as goods outperform services
Source: Bloomberg, Goldman Sachs Global Investment Research
We’ve seen tech employment decline as AI is getting a stronger foothold within corporates.
Tech Employment Is Falling, But We Don’t Expect an AI-Driven Job Apocalypse
Source: US Bureau of Labor Statistics, Haver Analytics, Autor et al. (2022), Goldman Sachs Global Investment Research
Falling unemployment rate the key risk to easing
Source: Haver Analytics, Goldman Sachs Global Investment Research
China current account surplus reached a new record in 2025.
China’s Current Account Surplus in Percent of Global GDP Rose to a Record in 2025
Source: IMF, Haver Analytics, Goldman Sachs Global Investment Research
Market correlation getting lower and lower and we’ve seen big dispersion within the AI complex.
Increased dispersion across the AI complex
Source: Bloomberg, Goldman Sachs FICC and Equities, Goldman Sachs Global Investment Research
Looking at Europe there has been a lot of focus on energy prices were higher prices in recent years have curtailed European industries.
The carbon cost component has been the main driver of the difference in power prices between US and Europe.
The EU carbon cost component has been the main driver of the growing wedge between German and US power prices
German power price differential to the US and components breakdown, EUR/MWh
Source: Goldman Sachs Global Investment Research
If energy prices in Europe would come down German indices, cyclicals and mid-caps would be the main beneficiaries.
German indices, cyclicals, and mid-caps would be the key beneficiaries of decreasing gas prices
Correlation between TTF 1m forward settlement price and relative performance vs. STOXX 600 (monthly returns)
Source: Datastream, Bloomberg, Goldman Sachs Global Investment Research
Historically when we’ve seen inflation coming down we’ve seen higher valuations for Europe.
Lower inflation rates have been associated with higher valuations for Europe, on average
Note: 12m trailing P/E from 1973. 12m fwd P/E from 1987.
Source: Datastream, Worldscope, Haver Analytics, Goldman Sachs Global Investment Research
So far this earnings season we’ve seen EPS surprises slightly below the historical average and a lack of reward for companies who are surprising to the upside.
Average EPS surprise is slightly below the historical average (Equal Weighted (%))
Source: FactSet, Bloomberg, Goldman Sachs Global Investment Research
We observed a lack of reward for companies surprising to the upside
Source: FactSet, Bloomberg, Goldman Sachs Global Investment Research
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