Market Pulse June
Market Pulse June
Market Pulse June
We expect real GDP growth to slow in the second half of the year as high energy prices weigh on consumption and investment. However, recession is still not our base case as a resilient private sector drives growth in the US (2.1% for 2026), Germany’s fiscal expansion supports Europe (0.7%), and Chinese exports remain strong (4.7%).
Our research colleagues expect core PCE inflation to fall to 2.8% by December as tariff effects fade and wage and shelter inflation continue to cool, though higher oil prices and AI-related price pressures may provide some offset. In Europe, we expect core inflation to rise to a peak of 2.7% amid higher energy prices before gradually declining to 2.0% in 2028.
Given rising prices and inflation expectations, we expect the European Central Bank to deliver two 25bp hikes this year in June and September before cutting back to 2% in 2027. We think the Bank of England and FOMC can remain on hold this summer, while the Bank of Japan will likely continue its hiking cycle at its July meeting.
Source: Bloomberg and Goldman Sachs Asset Management. As of May 30, 2026. Chart shows the 30-year bond yield of various sovereign notes. Past performance does not predict future returns and does not guarantee future results, which may vary. For illustrative purposes only.
Global bond yields have risen sharply as persistent inflation, resilient growth, and spillovers across markets lead investors to scale back expectations for central bank easing and price in higher-for-longer rates. Sustained fiscal deficits and elevated issuance may continue to lead investors to demand greater compensation for holding long-dated bonds. Meanwhile, shorter-term rates remain more closely tied to policy paths, which may be more balanced between hikes and cuts in the years ahead.
Despite shifts to our macro outlook, we have upgraded our core equity views for the year as earnings continue to drive markets higher. AI is the dominant theme in the US and EM, with the S&P 500 and MSCI EM printing an exceptional 25% and 38% YoY EPS growth in Q1, respectively. European earnings are buoyed by energy and financials, while Japan continues to make broad-based progress on revenues and margins.
Although the Strait of Hormuz remains effectively closed, physical Brent prices remain well below their early-April highs, driven by substantial reserve releases and a lack of demand from China refineries. Import reduction is also spreading from Asia to Europe. If energy flows resume in the next month, we think Brent futures could hover near $90/bbl by year-end.
Asset Class Forecasts: Price targets of major asset classes are provided by Goldman Sachs Global Investment Research. As of June 1, 2026.
Building Better Portfolios
Diversified portfolios have faced a series of exogenous shocks in recent years that have challenged traditional 60/40 performance. We believe that the energy shock will largely be restored over the next few months, but lingering inflation concerns and less accommodative monetary policy means that diversified portfolio returns may be more modest than initial forecasts. As it stands, we remain constructive on equities and fixed income, but are also thinking creatively about adding alternative income streams.
Source: Datastream and Goldman Sachs Asset Management. As of May 29, 2026. Chart shows the one-month change in equity market performance based on the one-month change in interest rates as measured by standard deviation vs. past three years. Data since 2000.
Historically, the speed and source of rate changes matter more for equities than the level of rates themselves. Today, a jump of 40bp or more in a month would likely cause some indigestion. As global equities have rallied sharply from March lows, we are mindful of the risk that higher yields, oil prices, or geopolitical risk may introduce. We continue to like equity income strategies to aim to help buffer some of this potential volatility, while participating in potential upside.
Source: Bloomberg and Goldman Sachs Asset Management. As of May 29, 2026. Chart shows the yield and breakeven yield move for US Treasuries and German Bunds. Breakeven moves are the change in yield required for total return to be negative based on price change and income level.
The backup in yields has challenged fixed income returns YTD, but for the long-term investor we still think today’s opportunity set can be compelling. Sovereign benchmarks are offering attractive income, and rates would have to move up significantly in order to deliver negative returns over the next year. Central bank hikes appear fairly priced at this point, and if the macro backdrop were to deteriorate then policymakers have ample room to cut, creating an attractive asymmetry.
Source: Goldman Sachs Asset Management. As of May 29, 2026. Chart shows the Annualized Return During Periods With Core Inflation Exceeding 2.5% YoY (Since 2000). Source is Burgiss for private infrastructure and real estate, S&P 500 for public equities, Bloomberg Barclays US Agg for public fixed income and BLS for inflation (year-over-year increase in CPI ex-food and energy. Indices are unmanaged and do not include fees. Private infrastructure is not traded on an exchange and will have less liquidity than public entities.
For investors seeking differentiated sources of income, alternatives may provide unique exposure. We think structurally higher inflation risks and the growth of AI will continue to fuel investor interest in real assets. Private infrastructure has historically demonstrated resilience through economic cycles given steady cash flows, and delivers notably strong returns in inflationary periods. It is also likely to benefit from secular trends like supply chain reconfiguration, energy transition, and digitization.
