Luke Barrs, Chief Business and Client Officer within Fundamental Equity at Goldman Sachs Asset Management expects equities to remain constructive into 2026, even as elevated valuations create a narrower path forward. Large cap multiples have expanded after a strong rally, and market history suggests that a pullback of around 10% would not be unusual. Still, the earnings backdrop remains supportive, and Barrs sees fundamentals as the key reason public equities continue to look attractive.

AI remains a defining driver, but Barrs views it more as a structural shift than a short-term trade. Capital expenditures have risen roughly 50% this year to around $360bn, and he anticipates another 20% to 30% increase in 2025 as hyperscalers keep building infrastructure. The investment cycle, however, is now evolving. He expects a rotation from hardware buildout to software applications, where competitive differentiation will widen. For now, the largest platforms still hold a clear advantage due to scale and proprietary data.

Beyond technology, Barrs points to healthcare as an area where innovation has outpaced valuation. Increased R&D spending and a surge of activity across smaller biotech firms are creating opportunities the market has yet to fully acknowledge. He also sees small caps benefiting from broader earnings participation and from rate normalization, which helps companies carrying floating-rate and short-maturity debt. Outside the US, he highlights Europe and India, where he expects earnings to accelerate from more reasonable starting valuations.

Source: Video - 2026 Equity Insights: AI, Healthcare, and Global Opportunities