Momentum Risks Yielding to Bonds

Goldman Sachs warns that while robust earnings growth supports current equity highs, rising bond yields and extreme sentiment (99th percentile RAI) increase correction risks. The report highlights a structural shift favoring 'HALO' (heavy asset) companies over capital-light tech as AI capex explodes.

Key Takeaways

• 1.Global earnings growth remains robust, driven largely by Information Technology and Energy, with global nominal GDP growth estimated at 5.9% for 2026.
• 2.Market concentration and sentiment are at extreme levels; the Risk Appetite Indicator (RAI) is in its 99th percentile, the highest since 2021.
• 3.Rising bond yields pose a significant risk to equity valuations, with the correlation between equities and bond yields turning negative as ERP is compressed.

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