Dear Reader,
Happy Monday. December 15th - I can’t believe it.
It seems like just yesterday we started this year together, and now we’re looking at 2026! Just around the corner.
So today I want to share with you Goldman Sachs’ 2026 Outlook, because there’s some really good investing ideas in there.
First, if we can take just a moment to look at 2025 - what a whirlwind of a year. Trump began his presidency this year…
We had the “Liberation Day” tariffs, which sent the market crashing hard - worst April since The Great Depression (thankfully, we were able to use that crash to get into some great stocks cheap)…
Then we saw the market go on to hit all time highs again and again.
We had China block rare earths, Trump try to negotiate with China using our own gun against us…
I don’t want to go into all of that - it’s just wild when you think about what all has happened this year.
What an exciting time to be alive.
That’s what I love about this business.
I remember when JFK was running for president. I saw an interview of him - really young - before he started to take off in the primaries…
A reporter said to him, “Why do you want to be president?”
He looks at the reporter, it must have been late at night, and he says, “because that’s where the action is.”
Boy, oh boy, was he right.
This is where the action is, too.
Anyway, Goldman Sachs put out its 2026 Investing Outlook.
They laid out five key takeaways I want to share with you.
Their basic theme is, where do you invest in an expensive market?
The idea here is the Mag 7 are so expensive relative to the market, it’s bubble level expensive.
So, when you compare this with other high markets, whether it’s the go-go sixties or dot-com bubble - whatever it is…
You see in each of these one sector become disproportionately valuable relative to the rest of the market.
Same thing with real estate.
I remember during the real estate bubble in 2006-07, the banking sector was 40% of the stock market.
They were writing all those mortgages, but 40% is still too high. That’s crazy as a percentage of all the stocks in the S&P 500.
Right now, the Mag 7 make up about 40% of the value of the stock market.
So either Mag 7 stock prices have to go lower, or the rest of the stock market has to come up to find some balance.
We don’t know which of those two things will happen, but one of Goldman Sachs’ themes for 2026 is that investors will start asking about return on AI spend.
The last couple years has been all about the spend itself and the beneficiaries of that spend.
We’ve seen OpenAI, Anthropic, all these AI companies spending billions building data centers…
Facebook, Google spending all this money…
Now people are starting to ask, “where’s the beef?”
“Where’s the return on investment?”
So Goldman’s saying that’ll be the AI emphasis in 2026.
And we don’t have to wait for 2026 to see it - this is already happening.
So shifting from a focus on spend to a focus on return on AI spend is a key theme for them, and something we’ve talked a lot about here this year.
The second key theme Goldman Sachs lays out regarding where to invest in an expensive market is also something we’ve hammered home for a long time…
Healthcare stocks are the cheapest they’ve been in 30 years.
“This sector presents a value opportunity” - that’s a direct quote from Goldman Sachs.
No doubt about it.
I’ve been saying this for a (painful) year.
But we’re finally starting to see these things start to move up in our Biotech Insider model portfolio - thank goodness.
People talk about a “crypto winter”...
We’ve been in a “biotech winter” for a while.
I thought it would’ve turned around sooner. But with RFK in Health and Human Services we had a lot of policy ambiguity.
So there was a cloud over biotech all year.
Biotech Insider members know. You guys have been hanging tight and I’m grateful for that.
We’ve gone through times like this before and as our long-term track record shows you, we kick butt long-term.
Biotech requires patience. And rewards it. Big time.
And as we’ve said, as Goldman says, healthcare stocks are just so, so cheap.
Buy healthcare - I am telling you - even if you don’t subscribe to Biotech Insider - even if you just buy a healthcare index fund…
This sector is unbelievably cheap. When you have a sector this cheap you could throw darts at a wall and make money as investors start coming back into it.
Do it.
Another takeaway out of Goldman’s 2026 Outlook is Europe.
There’s a lot of good value in Europe.
We have a lot of exposure there in Breakthrough Wealth - specifically European defense manufacturers.
Goldman Sachs talks about defense and makes a point to mention the value still in Europe, especially among defense manufacturers as Germany and France and all these countries re-arm.
And finally, they see the labor market continuing to weaken.
Which is very interesting.
A weaker labor market means lower rates.
And the Fed Chairman last week, as he lowered rates a quarter point which I didn’t talk about because we were in the middle of a big product launch…
Jerome Powell said he thinks the job numbers are overstating employment growth.
So everybody’s very curious to see how AI is affecting the job market.
And guys, I gotta tell you, we would’ve hired three people in the past six months but ended up hiring one because we’ve found ways for AI to handle some of the lower jobs, which has been really good for Behind the Markets.
I’ll bet some of you business owners reading this are equally impressed with what AI can do for you, and using it to do a lot of lower-level-thinking jobs. If that’s you, hit reply and let me know.
But it is very concerning for our society.
Look - I have kids. My daughter just turned 17. My son is 10.
I look at them and think, “gosh - what to do in a world where AI is a thing?”
What do we train our kids for?
We now have, for the first time in human history, intelligence on demand.
Since the internet came out, we’ve had information on demand.
Libraries gave us information on demand.
But now we have “intelligence on demand.”
The good news is, for now at least, you have to be intelligent to extract the intelligence from the intelligence on demand.
But those of us who run businesses, and I know many of you, our readers do…
We think about these things.
We’re going to know how to use a machine that unfortunately hurts the labor market.
In the 1980s we pushed blue collar jobs to China. And through the ‘90s, 2000s we kept pushing these jobs overseas.
Now, we’re going to see white collar jobs replaced.
I remember Reagan saying, “recession is when your neighbor loses his job. Depression is when you lose yours.”
That line has always stuck with me.
Anyway, that’s what I have for you this Monday: Goldman Sachs 2026 Outlook at a glance.
Speak to you tomorrow.
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