MW These are the stock-market trades to make going into the end of the year, according to Goldman Sachs

By Jamie Chisholm

An unwind of the AI trade represents the clearest potential catalyst for a reversal, says Wall Street bank

Head for alternative asset managers in the last quarter of 2025

The market reaction to Friday's dour nonfarm payrolls data could have been worse.

Sure, it's not good to see stocks hit a fresh record high only to finish down on the day. But the S&P 500 SPX nevertheless closed well off session lows to sit only a fraction shy of its peak.

Encouraging this investor stoicism is undoubtedly the hope that a sharp economic deterioration can be avoided but that the soft labor data makes it much easier for the Federal Reserve to continually reduce official borrowing costs.

A Goldman Sachs strategist team led by David Kostin appear firmly in this camp. In a new note published late Friday, they say their economists now see the Fed cutting interest rates by 25 basis points three times before the end of the year - with two more such cuts in 2026.

And while they expect real GDP growth will stay below-trend for the rest of this year, they reckon the U.S. economy will avoid a recession.

This combination will be good for stocks, they add: "During the last 40 years, the S&P 500 has typically generated positive returns following the resumption of Fed cutting cycles during which the economy continued to grow."

Consequently, Goldman forecasts that the S&P 500 will advance another 2% to 6,600 by the end of this year, and will reach roughly 6,900 by the middle of 2026, a 6% rise from here.

These gains will be powered by the S&P 500 enjoying earnings per share growth of 7% in both 2025 and 2026, rather than an increase in the market's valuation multiple.

"Our forecast is roughly in line with the consensus for 2025 but below both the top-down and bottom-up consensus in 2026. The typical pattern of downward revisions to consensus earnings forecasts leads us to expect analysts will ultimately revise their estimates closer to ours, however," the Goldman team says.

Kostin and colleagues note that there are risks to this earnings scenario. A negative impact may come if the increased U.S. import tariffs trim corporate margins by more than feared. A more positive impact may come from a weaker dollar and the secular growth of big tech.

Still, in the short term , there's a chance for a market reversal caused by an "unwind" of the AI trade, according to Goldman. "Weakness in the AI trade has already emerged, as Nvidia (NVDA) has fallen by 9% since its August peak while AI-exposed equities more broadly underperformed the equal-weight S&P 500 by 3 percentage points over the same time period," the bank says.

The trajectory of capex spending growth from hyperscalers like Amazon (AMZN), Alphabet $(GOOGL)$, Meta $(META)$ and Microsoft $(MSFT)$ will thus be key for the valuation of AI infrastructure stocks and the strength of the AI trade more broadly, Goldman adds.

With all this in mind, Kostin and colleagues give three investment strategies going into the final quarter of 2025. First, they suggest buying alternative asset managers because, unlike banks, their valuations have not recovered post-election highs despite a supportive macroeconomic and capital markets backdrop. The sector includes KKR $(KKR)$, Blackstone (BX) and Apollo $(APO)$.

Source: Goldman Sachs

Second, look at companies with high levels of floating rate debt that will benefit from lower interest rates from the Fed and the increase in interest deductibility legislated in the One Big Beautiful Bill fiscal package. "We estimate that every 100 basis point decline in the cost of debt would boost the earnings of these companies by slightly more than 5%," says Goldman. Peloton Interactive (PTON), Lumen Technologies (LUMN) and Petco Health & Wellness $(WOOF)$ are three examples.

Finally, buy gold miners such as Dakota Gold (DC), AngloGold Ashanti (AU), and Royal Gold $(RGLD)$. "Our commodity strategists anticipate gold prices will rise by 14% through 2026 due to strong central bank and ETF demand. Gold mining stocks should rally alongside the underlying commodity," they say.

The markets

U.S. stock-index futures (ES00) (YM00) (NQ00) are higher as benchmark Treasury yields BX:TMUBMUSD10Y nudge up. The dollar index DXY is lower, while oil prices (CL.1) rise and gold futures (GC00) are trading around $3,655 an ounce.

   Key asset performance                                                Last       5d      1m      YTD      1y 
   S&P 500                                                              6481.5     0.33%   1.44%   10.20%   19.84% 
   Nasdaq Composite                                                     21,700.39  1.14%   1.17%   12.37%   30.01% 
   10-year Treasury                                                     4.089      -14.40  -20.00  -48.70   38.50 
   Gold                                                                 3651.6     3.84%   7.60%   38.35%   44.02% 
   Oil                                                                  63.08      -1.45%  -1.44%  -12.23%  -8.31% 
   Data: MarketWatch. Treasury yields change expressed in basis points 

The buzz

U.S. economic data due Monday include consumer credit for July, published at 3 p.m. Eastern, with key inflation data coming later in the week.

The price of Brent crude (BRN00), the international oil benchmark, is rising despite news over the weekend that OPEC+ agreed to further increase oil production in October.

Treasury Secretary Scott Bessent dismissed costs of tariffs, but says U.S. would have to give huge refunds if they're overturned.

Shares of Robinhood Markets (HOOD), AppLovin (APP) and Emcor $(EME)$ are up after they were promoted to the S&P 500.

China imports to the U.S. fell 33% in August, the fifth month of double-digit declines, according to Bloomberg.

The Nikkei 225 JP:NIK in Tokyo rose 1.45% after Japan's Prime Minister Shigeru Ishiba announced Sunday that he will resign.

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The chart

Apollo Global

Torsten Slok, chief economist for Apollo Global, observes that the U.S. Census Bureau conducts a biweekly survey of 1.2 million firms, and one question is whether a business has used AI tools such as machine learning, natural language processing, virtual agents or voice recognition to help produce goods or services in the past two weeks. "Recent data by firm size shows that AI adoption has been declining among companies with more than 250 employees."

Top tickers

Here were the most active stock-market tickers on MarketWatch as of 6 a.m. Eastern.

   Ticker  Security name 
   NVDA    Nvidia 
   TSLA    Tesla 
   OPEN    Opendoor Technologies 
   GME     GameStop 
   PLTR    Palantir Technologies 
   NIO     NIO 
   AMD     Advanced Micro Devices 
   AAPL    Apple 
   AVGO    Broadcom 
   TSM     Taiwan Semiconductor Manufacturing 

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-Jamie Chisholm

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September 08, 2025 06:43 ET (10:43 GMT)

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