Core Viewpoint - Goldman Sachs predicts that the biggest investment opportunities in 2026 will arise from cyclical sectors rather than the current focus on artificial intelligence and mega-cap tech stocks [1][11]. Sector Analysis - Analysts expect a significant acceleration in earnings per share (EPS) growth in cyclical sectors due to anticipated economic growth in 2026, particularly in Industrials, Materials, and Consumer Discretionary [2]. - EPS for real estate companies is projected to increase from 5% this year to 15% next year, while Consumer Discretionary is expected to rise from 3% to 7% [3]. - Industrial companies are forecasted to see EPS growth accelerate from 4% to 15% [4]. - In contrast, EPS growth for information technology companies is expected to moderate from 26% in 2025 to 24% in 2026 [5]. Market Trends - Recent market actions indicate a shift towards cyclical stocks, which have outperformed defensive stocks for 14 consecutive trading days, marking the longest streak in over 15 years [6]. - Despite this outperformance, market positioning suggests that investors are anticipating growth closer to 2%, which is below Goldman’s forecast of 2.5% [6]. - Goldman analysts emphasize that the market does not seem to fully price in the expected economic acceleration in 2026, which is crucial to their outlook [7]. Earnings Forecast - Goldman Sachs anticipates a 12% rise in S&P 500 earnings per share in 2026, driven by overall US economic growth [7]. - The S&P 500 has increased by 16% this year, with the "Magnificent Seven" mega-cap tech stocks comprising about one-third of the index's weight [9]. - Nvidia, a leading AI chip maker, has seen its shares rise by 30% this year, highlighting the current enthusiasm for AI [10].