Top Goldman Traders Ask (And Answer) The Big Questions Of 2026

The full first week of 2026 was a solid one, according to Goldman Sachs head of hedge fund coverage, Tony Pasquariello, as the market made higher highs, breadth was healthy and the momentum factor performed well (despite the tech space notably underperforming).

Global defense stocks are off to a blistering start. witness YTD returns in the US (GSXUDFNS +13%), Europe (GSSBDEFE +21%) or the ongoing eye-popper in Korea (GSXAKDEF +27%).

While one can quibble with valuation in certain names, when the President suggests the defense budget should rise from $900bn this year to $1.5tr next year, we suppose it’s worth keeping an open mind.

Stepping back, Pasquariello reached out to various subject matter experts within Goldman for answers to a set of questions that bounced around his head during break...

1. what’s our expectation for the glidepath of US GDP growth? 

Joseph Briggs:

our forecast for US growth in 2026 is an optimistic 2.8% (vs. 2.1% consensus) due to four factors: a mechanical rebound from a government shutdown, a fading tariff drag, significant tax cuts from the OBBA, and easier financial conditions.  all of these impulses are set to be strongest in the first half of the year.  the government shutdown payback should boost Q1, households will receive an extra $100bn in tax refunds during the Feb-April filing period, and our FCI impulse calls for a 0.3pp boost to annualized GDP growth in H1.  as a result, we expect strong GDP growth of 3.3% in Q1 (qoq ar) and 2.6% in Q2, before a moderation to 2.1% in Q3 and Q4.

2. what’s the outlook for the US consumer? 

Elsie Peng:

consumer spending growth slowed in 2025, due mainly to slower real income growth, as job gains slowed and moderate tariff-related increases in goods prices kept inflation elevated.  looking ahead to 2026, we expect these two headwinds to gradually abate, and a gradual rebound in job growth (to a healthy pace of 70k/month), tax cuts included in the new fiscal bill, and wealth effects from past equity price gains should provide boosts to household spending.  we forecast solid consumption growth of 2.2% in 2025 on a Q4/Q4 basis, exceeding the consensus forecast of 1.9%, and expect stronger spending growth in the first half of the year.

3. what’s the outlook for US housing?

Ronnie Walker:

a challenging one.  we don’t have much in the way of mortgage rate relief in the forecast because our terminal rate view is similar to the market’s.  limited mortgage rate relief translates to anemic growth in most housing variables: we’re penciling in low single digit home price, housing starts, and home sales growth over the course of 2026.  much discussion over the last year has been around what the administration can do to ease affordability constraints, and the upcoming midterms only will only keep those top of mind. 

4. what policy changes do we expect from the Trump administration? 

Alec Phillips:

the biggest political issue continues to be "affordability" (note President Trump's rare prime-time address on the issue just before the holidays).  two obvious policy levers here would be tariff cuts or another fiscal package.  [on the latter], a second fiscal package is possible, but we think the odds are against it as some congressional Republicans might balk at additional deficit expansion.  deregulation will continue, with the most tangible effects in energy and financials.  housing affordability is also apt to be in focus, with Trump pledging “aggressive” action in last month’s address.  this might include 50-yr mortgages or MBS purchases, among expansions of GSE activities, but this remains to be seen. 

5. what’s the outlook for the trajectory of the US budget deficit?  

David Mericle:

we expect the federal deficit to remain fairly steady at around 6% of GDP over the next couple of years, though this will depend on what happens with tariff rates.  there has been talk of another fiscal package in 2026 to provide additional stimulus, but we think the hurdle is high.  while the federal deficit is likely to be little changed overall, its trajectory remains unsustainable, and even inaction is costly because the more debt and interest expense-to-GDP grow, the greater the eventual fiscal adjustment will need to be.

6. what’s the outlook for the US bond market? 

Will Marshall:

our baseline view is a relatively range-bound one for longer term UST yields (10s centered around 4.2%) alongside a steeper yield curve as the Fed cuts further.  but how US rates navigate that backdrop may be a bit more interesting -- under econ’s baseline the market’s going to be grappling with above-consensus growth and ongoing AI capex versus disinflation and a sideways unemployment rate.  the sequencing of it all may matter, as the projected growth upside is somewhat front-loaded in the year, whereas our forecast for disinflation becomes more pronounced versus market pricing as the year goes on -- there’s a reasonable path where cyclical upside is in the driver’s seat to start before giving way to relaxation. 

7. S&P trades on a 22x forward P/E multiple -- is this a “fully valued” market or an “overvalued” market? 

Ben Snider:

the P/E multiple is undeniably high relative to history, matching the peak in 2021 and just a couple turns shy of the record high in 2000.  however, today’s multiple is also close to what historical relationships would indicate given the favorable macroeconomic and corporate fundamental backdrop.  most importantly, high multiples don’t tell investors what to do; note the P/E today is about where the market started 2025 and where it registered in early 1999.  if the fundamental backdrop deteriorates, so will valuations and share prices.  but if earnings growth and Fed policy progress as we expect, the risks to multiples are skewed higher, not lower.

8. when should we expect to see an acceleration in earnings growth from AI? 

Ryan Hammond:

beyond the companies benefiting from AI infrastructure spending, companies could (1) increase revenues through demand for its AI products or (2) companies could lift revenues and/or margins by using AI in their own business to become more productive.  while the first channel is important for identifying which companies may be the “winners” from the AI race, and the run rate of AI revenues is growing rapidly, the size of the second channel is the potentially larger pool of savings that justifies the capex spending boom to date.  only a handful of companies quantified the impact of AI-related productivity on earnings in 2025, but we expect that number will gradually grow over the next few years.  we have built in a 0.4% boost to S&P 500 earnings via AI-related productivity gains in 2026 and a 1.5% boost in 2027, but the degree of uncertainty remains wide.

9. on a scale of -10 to +10, how much length does the trading community currently hold in equities? 

Gail Hafif:

close to +8 by looking at the major investor groups.  most recently, GS PB had overall book Net Leverage at 80.9% (92nd percentile 1-year, 77th percentile 5-year).  additionally, within the institutional cohort, CFTC S&P Futures Asset Manager positioning stands at $325.62B which is just under the 98th percentile on a 1y lookback.  retail tells a different story given, as of Thursday’s close, GS estimates that the total notional of the tape traded by retail investors was $45.77B -- this is in the 88th percentile on a 5y lookback but only in the 58th percentile on a 1y lookback. lastly, systematic strategies show cleaner positioning after the mild correction preceding the Santa Rally. global CTA Positioning stands at $157.87B which is in the 87th percentile on a 5y lookback and in the 72nd percentile on a 1y lookback.  the other two main systematic strategies diverge in this low vol regime – the risk parity cohort is positioned in the 70s percentiles on both a 1y and 5y lookback while vol control positioning now sits in the 90s percentiles looking at the same windows.

Finally, regarding flows and positioning, Pasquariello admits to wondering how the US market can duplicate the intensity of demand that it enjoyed last year (while acknowledging that he could have said the exact same thing at the start of 2025).

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