Odd Lots

Goldman's Hatzius and Snider on the Outlook for 2026

December 29, 2025

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  • Goldman Sachs forecasts 2.6% real GDP growth for 2026, supported by accelerating productivity growth (estimated at 2% trend) which helps square growth with flat unemployment at 4.5%. 
  • The AI build-out has contributed close to zero to measured U.S. GDP growth in the last year because the necessary goods are largely imported and semiconductors are treated as intermediate inputs. 
  • The S\&P 500 target for 2026 from Goldman Sachs is 7,600, and market concentration is historically high, though speculative activity indicators remain below the dot-com bubble peaks of 25 years ago and 2021. 

Segments

2026 Outlook Season Kickoff (Unknown)
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  • Key Takeaway: None
  • Summary: None
Goldman Sachs Alignment and Frameworks
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(00:06:04)
  • Key Takeaway: Goldman Sachs research teams operate on the coordinated side of the spectrum, relying heavily on economic forecasts to drive equity strategy.
  • Summary: Ben Snider, the US equity strategist, noted that equity market analysis relies heavily on the economic forecast, viewing stocks as a discounted stream of future cash flows driven by the economy. Jan Hatzius confirmed that macro teams are generally aligned, though not rigidly so, avoiding extremes in their outlooks.
GDP Growth vs. Unemployment
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(00:07:46)
  • Key Takeaway: Forecasted 2.6% real GDP growth in 2026 is expected alongside flat unemployment due to accelerating underlying productivity growth.
  • Summary: The forecast suggests strong GDP growth despite unemployment remaining flat at 4.5% because underlying trend productivity growth has accelerated to about 2% since the pandemic. This acceleration is expected to continue, driven by AI, impacting the relationship between GDP and joblessness.
2025 Market Drivers and Earnings (Unknown)
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  • Key Takeaway: None
  • Summary: None
Mega-Cap Tech Deceleration Concerns
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(00:10:40)
  • Key Takeaway: Recent weakness in mega-tech stocks stems from investor discomfort over decelerating AI capex growth and the increasing requirement for debt to sustain that growth.
  • Summary: The trade focusing on AI capex beneficiaries is facing headwinds as investors anticipate deceleration in that spending next year. Furthermore, the realization that continued growth requires more debt has made investors uncomfortable.
AI’s Measured GDP Contribution
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(00:11:42)
  • Key Takeaway: AI investment has contributed close to zero to measured U.S. GDP growth over the last year due to imported goods and semiconductors being treated as intermediate inputs.
  • Summary: Jan Hatzius stated that AI investment’s contribution to measured GDP growth is nearly zero recently, contrasting with other estimates. This is because the capital goods are largely imported (netting out GDP contribution) and semiconductors are not counted as investment in GDP figures.
Credit Underperformance View
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(00:13:43)
  • Key Takeaway: Credit is expected to modestly underperform because current valuations are priced for a very positive scenario, suggesting room for mean reversion despite good fundamentals.
  • Summary: Despite potentially good credit fundamentals, valuations are considered very high, priced for perfection. This leads to an expectation of modest underperformance due to mean reversion tendencies in the market.
CPI Report Nuances
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(00:14:46)
  • Key Takeaway: The recent CPI report likely understated shelter inflation due to the imputation of zero sequential rent growth for the month when data collection was suspended.
  • Summary: The Bureau of Labor Statistics uses a six-month growth rate for rents, and assuming zero sequential growth for October (due to the shutdown) understated the year-on-year November number. The overall inflation picture is encouraging, as the 50 basis points contribution from tariffs is viewed as a temporary price level effect expected to cycle out in 2026.
Tariff Impact on Equity Margins (Unknown)
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  • Key Takeaway: None
  • Summary: None
AI Productivity Winners
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(00:23:51)
  • Key Takeaway: Public equity investors are currently focusing on near-term earnings from AI capex beneficiaries (semiconductors, hyperscalers) rather than speculating on long-term productivity winners, unlike the dot-com era.
  • Summary: The market behavior shows a focus on current earnings rather than speculative expansion based on future productivity gains, a key difference from 25 years ago. However, the narrative is shifting toward identifying long-term productivity winners as anxiety builds around the infrastructure trade.
Labor Market and Tech Dominance
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(00:27:06)
  • Key Takeaway: Historically, technological advancement does not cause adverse long-term effects on aggregate unemployment, though it can increase frictional unemployment during the transition period.
  • Summary: History suggests that productivity growth eventually leads to job creation elsewhere, though there is a lag period where frictional unemployment may rise. The speed of AI adoption will determine the severity of short-term labor market disruption.
Consumer Spending vs. Sentiment
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(00:29:24)
  • Key Takeaway: Consumer sentiment surveys, particularly the University of Michigan, have become less reliable predictors of activity, with hard data showing consumers are ‘hanging in there’ despite pessimism.
  • Summary: Sentiment surveys are increasingly out of line with hard data, which suggests consumer spending is holding up, likely growing around 2% in real terms next year. Real consumer spending is expected to lag overall economic growth.
New Fed Chair Impact
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(00:31:43)
  • Key Takeaway: A new Fed chair appointment is unlikely to cause a major shift in policy outcomes over the near-term (6-18 months) due to the continuity of the committee structure.
  • Summary: The Federal Reserve operates as a committee, ensuring policy continuity in the short term regardless of the chair’s identity. More significant policy shifts would only emerge over longer horizons as more members of the Board of Governors and regional presidents turn over.
Equity Multiples Context
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(00:32:59)
  • Key Takeaway: Current elevated equity multiples are not unusual when compared to periods of expected accelerating earnings, such as the reopening or late 1990s, and function more as a measure of potential energy than a catalyst.
  • Summary: Multiples are high compared to historical averages but align with periods where earnings expectations were improving rapidly. Valuations indicate how much the market can move given a catalyst, but they are not the catalysts themselves.
US Housing Market Stagnation
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(00:42:05)
  • Key Takeaway: The US housing market is currently mediocre, characterized by sideways movement, low turnover, and low positive price appreciation, making it a minor feature in the 2026 economic outlook.
  • Summary: Housing activity is stuck in a tug-of-war between supportive low vacancy rates and affordability issues caused by high prices and mortgage rates. Demographic changes are also contributing to lower turnover, shifting economic focus to investment and technology.
China’s Resilience and Weakness
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(00:44:34)
  • Key Takeaway: China’s manufacturing and export sector remains strong despite US tariffs due to superior cost efficiency and control over rare earth supplies, offsetting a severe domestic property sector downturn.
  • Summary: Chinese exports have held up well globally, even as US imports declined, because China continues to produce better goods at lower prices. However, the domestic property crisis is subtracting an estimated 1.5 percentage points from GDP growth in 2026.
Historical Market Concentration (Unknown)
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  • Key Takeaway: None
  • Summary: None
Forecasting Challenges in 2025
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(00:48:34)
  • Key Takeaway: The government shutdown created permanent holes in economic data, notably causing the unemployment rate series to have an unprecedented gap for October 2025.
  • Summary: Forecasting in 2025 presented new challenges, including tracking the impact of widespread tariffs and dealing with the government shutdown. The shutdown resulted in a missing monthly unemployment rate figure for October 2025, which will look historically anomalous.
2026 Fed Policy Trajectory
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(00:49:56)
  • Key Takeaway: The forecast calls for two more Fed insurance rate cuts in 2026, bringing rates down to 3.0-3.25%, but an early January employment report showing rising unemployment could trigger an immediate cut.
  • Summary: The baseline forecast anticipates cuts in March and June 2026, moving rates toward the neutral estimate of 3% to 3.25%. If the January employment report shows a further increase in the unemployment rate, the Fed might be compelled to cut rates at the January meeting.