Jan Hatzius, chief economist and head of research at Goldman Sachs, and Ben Snider, the newly appointed chief U.S. equity strategist, discussed their 2026 market outlook in an interview on December 30. Both believe the U.S. economy is likely to continue expanding in 2026, but the growth pattern will differ from previous years. Against the backdrop of improving productivity, slowing inflation, and the Federal Reserve's policy gradually returning to neutral levels, employment, market valuations, and the AI investment cycle are entering a period of adjustment.
The economy continues to grow, but employment is leveling off, and productivity is rewriting the traditional cycle.
Hatzius stated that Goldman Sachs forecasts US real GDP growth of approximately 2.6% in 2026, indicating continued economic expansion without signs of recession. However, even with continued economic growth, Goldman Sachs does not expect a corresponding decline in the unemployment rate, projecting it to remain around 4.5% in 2026, exhibiting a pattern of "continued growth and stable employment."
Hatzius points out that this does not reflect economic weakness, but rather is related to increased productivity. In the five years following the pandemic, the trend in US productivity growth is around 2%, significantly higher than the pre-pandemic rate of approximately 1.5%, and this surge has not yet fully factored in the impact of AI. Given this accelerated productivity growth, economic growth does not necessarily create a large number of new jobs, which explains why the unemployment rate may remain relatively high even with GDP growth in 2026.
As the effects of tariffs gradually fade, inflation is converging towards policy targets.
Regarding the inflation outlook, Goldman Sachs believes that inflation data in 2025 will still be affected by tariffs and statistical techniques, but the inflation environment will improve significantly in 2026. Hatzius points out that Goldman Sachs estimates that tariffs will push up core inflation by about 0.5 percentage points in 2025, lower than the previously expected 1 percentage point.
He described the impact of tariffs as more like a one-off "price level rise," and the current assessment is that the potential inflation level in 2026 is gradually approaching the policy target of 2%.
Policy has returned to the neutral range, and the Fed still retains flexibility in cutting interest rates.
Regarding the monetary policy path, Hatzius stated that Goldman Sachs maintains its forecasts from the past six months. The Fed has already implemented approximately 75 basis points of "insurance rate cuts" in 2025, and two more rate cuts are expected in 2026, ultimately bringing the policy rate back to a neutral range of approximately 3% to 3.25%.
Goldman Sachs currently assumes interest rate cuts will occur in March and June 2026, but also acknowledges a high degree of uncertainty. If the job market weakens further, the timing of the rate cuts could be brought forward. Conversely, if the economy and employment remain resilient, the rate cuts could be delayed until the second half of the year.
Profitability remains the core focus; US stocks return to fundamentals-based evaluation.
Regarding the outlook for US stocks, Chief Strategist Snider pointed out that Goldman Sachs' core assessment of US stocks in 2026 remains "returning to profitability."
Goldman Sachs has released its 2026 S&P 500 target of 7,676 points. This forecast is not based on rapid valuation expansion, but rather on the assumption of continued corporate cash flow and profitability. Snider emphasizes that the stock market is essentially a discounted representation of future cash flows, and the most important factors influencing stock market performance remain corporate earnings and the overall economic environment.
AI investment has entered a cooling-off period, and long-term benefits still need to be accumulated.
Speaking about AI, Snider stated that the market narrative in 2026 is significantly different from that of the past three years. In the past few years, investors focused on the rapid expansion of capital expenditures on AI infrastructure and who would directly benefit from this investment boom. However, as the market gradually realizes that AI investment growth will slow down in 2026, and continued growth may require taking on higher debt, investment attitudes have become more conservative.
Goldman Sachs has also formally included AI productivity gains in its 2026 S&P 500 earnings forecast for the first time. However, Snider emphasizes that this impact remains small, contributing less than 0.5% to overall corporate profits. Currently, investors still primarily base their forecasts on current earnings, and the market is still some distance from a typical historical bubble phase. The long-term benefits of AI for businesses and the economy will continue to accumulate gradually over time.
This article, "Goldman Sachs 2026 Market Outlook: The Economy Is Still Growing, but AI Investment Momentum Is Slowing," first appeared on ABMedia, a ABMedia .
