[Goldman Sachs Report] No Leader Lasts Forever: The 'Great Rotation' Sweeping Global Markets

Original Report Date: February 23, 2026

📌 3-Line Summary

• Distinct Capital Flows: A clear 'rotation' is underway, with global capital moving from equities to bonds/MMFs, from US stocks to non-US stocks (especially Europe), and from cyclicals to defensives.
• Weakening Investor Sentiment: Overall risk appetite has decreased, pushing up the cost of hedging against downside risk. Hedge funds are increasing gross exposure (trading volume) to manage volatility rather than making directional bets.
• Solid Fundamental Outlook: Despite cooling sentiment, Goldman Sachs maintains a robust forecast for 2026 US GDP growth at 2.7% (above consensus) and sets an S&P 500 target of 7,600 (approx. +10% upside).

📖 In-Depth Report Analysis

In its latest strategy report, Goldman Sachs diagnoses that a 'Rotation'—where capital moves from one asset class or region to another—is becoming increasingly pronounced across global markets.

■ 1. Divergent Regional Performance and the Oil Rebound

• Global equities rose +1% last week, but regional performance was split, with Europe (+1.6%) leading and Japan (-1.8%) lagging, indicating active capital movement.
• Brent crude surged 6% over the week. However, Goldman Sachs maintains its long-term view that it will fall back to around $60 per barrel by Q4 2026.
• The recent Supreme Court ruling shifting to a '15% Global Baseline Tariff' is expected to have limited macroeconomic impact.

■ 2. Cooling Sentiment and Expensive 'Hedging Costs'

• Lower Risk Appetite: Overall investment positioning and sentiment indicators have declined.
• Rising Cost of Protection: Increased volatility has made 'downside hedging' (e.g., put options) more expensive, signaling a shift towards a 'risk-off' market stance.
• Hedge Fund Caution: Hedge funds have increased gross exposure (trading volume) by adding to both long and short positions to manage volatility, but net leverage (directional betting) remains unchanged, reflecting a cautious approach.

■ 3. The Great Money Move: To Bonds, and Out of the US

• Flocking to Fixed Income: Strong capital inflows into bonds and money market funds (MMFs) have been observed this year, while momentum into equity funds has slowed.
• De-Americanization: Within equities, there is a clear rotation from 'US stocks' to 'non-US stocks'. Inflows into US tech stocks have also slowed, attributed to concerns over the 'disruptive impact of AI innovation' on existing business models. (However, selective investing continues).

■ 4. Style Rotation: Cyclicals Fade, Defensives Rise
Capital rotation is also evident across styles and sectors. The ratio of flows into 'defensives vs. cyclicals' has reached multi-year highs. Inflows into traditional 'growth vs. value' are also decreasing, reflecting fatigue with existing leadership themes and a desire to avoid volatility.

■ 5. Nonetheless: Fundamentals Remain 'Sunny'
Despite cooling sentiment, Goldman Sachs maintains a positive outlook on US economic fundamentals.

• 2026 GDP Growth Forecast: US 2.7% (above consensus 2.5%) > Eurozone 1.3% > Japan 0.6%
• 12-Month Index Targets:

💡 StockHub Insight & Comments

The 'Great Rotation' has begun as market heat cools and investors adopt a defensive stance. This doesn't necessarily signal an imminent crash, but rather a time to shift away from overly concentrated portfolios in US big tech and look towards other regions with attractive valuations (like Europe or Asia) or defensive sectors.

It is crucial to note that Goldman Sachs still maintains robust forecasts for US economic growth and stock market targets. Therefore, instead of drastically increasing cash holdings, a 'rebalancing strategy' of trimming existing leaders and reallocating that capital into bonds, undervalued non-US stocks, or defensives appears valid.