Goldman Sachs Strategists See U.S. Stock Market Rally Extending as Fed Cuts Loom

Key Takeaways:Goldman Sachs says the U.S. stock rally is likely to extend amid strong economic outlook.Market gains have been concentrated in a few large-cap stocks, with most S&P 500 components still below their highs.Expected Fed rate cuts and improving corporate earnings could broaden the rally to small-cap stocks.Goldman Sachs strategists predict that the record-breaking rally in U.S. equities will continue, citing supportive macroeconomic conditions and upcoming policy shifts.The team, led by David Kostin, noted that while headline indexes like the S&P 500 are at all-time highs, gains remain narrowly concentrated among a handful of mega-cap stocks. The median S&P 500 component is still about 11% below its 52-week high, underscoring limited breadth in the market’s advance.Kostin and his team argue that this dynamic may shift in the coming months. With the Federal Reserve expected to begin cutting interest rates and corporate earnings showing signs of recovery, strategists believe a broader rally is likely, extending into small-cap and undervalued sectors that have lagged.“Limited breadth has defined the current cycle,” Kostin said, adding that Fed policy easing and profit growth could help “expand participation across the equity market.”