The hype and potential bubble in AI are concentrated in private markets, evidenced by vendor financing and easy credit for any AI-linked venture. In contrast, public markets are viewed as more realistic, and the high concentration in top tech stocks is not statistically correlated with poor forward-looking returns.
In 2025, US stocks underperformed global peers despite superior earnings growth. Non-US markets saw significant price increases on flat or negative earnings, a divergence that Goldman Sachs Wealth Management believes is unsustainable, reinforcing their long-term US overweight thesis based on earnings fundamentals.
Contrary to a common myth, high equity valuations do not reliably revert to a historical mean. An analysis of 32 different valuation scenarios found only one case of statistically significant mean reversion. Structural economic shifts, like reduced GDP volatility since the 1990s, justify higher sustained valuation levels.
Goldman Sachs Wealth Management questions China's official ~5% GDP growth, citing respected third-party analysis from firms like the Rhodium Group suggesting real growth is closer to 1-3%. This fundamental skepticism underpins their cautious stance on Chinese equities, despite recent market rallies.
Despite its reputation, gold is not a reliable strategic inflation hedge, working only about 50% of the time. In contrast, U.S. equities have historically provided a 100% effective hedge against inflation over the long run, making them a superior asset class for preserving purchasing power in a diversified portfolio.