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Investing.com -- Goldman Sachs has adjusted its European equity targets and sector positioning as rising energy prices and a weaker growth outlook reshape the macro backdrop.
The bank said higher energy prices have already prompted revisions to the economic outlook. “Our commodities strategists revise up forecasts for oil (at $77/bbl on average in 2026) and gas prices (at 46 EUR/MWh on average),” strategists led by Sharon Bell wrote in a new note.
As a result, Goldman Sachs economists lowered their forecast for U.S. economic growth in 2026, cutting the fourth-quarter-to-fourth-quarter GDP estimate by 0.3 percentage points to 2.2%, while projecting full-year growth of 2.6%. They also said the inflation outlook is now somewhat higher, which has pushed back expectations for the first Federal Reserve rate cut.
“Given the inflation path will be higher they have pushed back the first cut in their Fed forecast from June to September, followed by a second cut in December to the same terminal rate of 3–3.25%,” the strategists said.
In Europe, Goldman Sachs kept its broad index outlook largely unchanged but updated several targets to reflect recent market moves. The bank continues to project the STOXX Europe index at 605, 615 and 625 on a three-, six- and 12-month horizon, implying modest upside of roughly 1% to 4%.
However, the strategists revised regional targets within Europe, lowering their forecast for the Euro area benchmark while lifting the outlook for the U.K. market. The adjustment reflects the FTSE 100’s more defensive sector mix and value characteristics, while the Euro area market has greater cyclical exposure.
At the sector level, the team said it is tilting portfolios slightly more toward defensive areas while reducing exposure to segments vulnerable to the recent energy spike.
Among the changes, the bank raised Construction & Building Materials to Overweight and added both its Renewables basket and capital-intensive “HALO” companies as overweight positions.
Energy was lifted to Neutral, while Financial Services was reduced to Neutral and Media downgraded to Underweight. Autos and Chemicals remain Underweight due to competitive pressures, particularly from China.
Despite the softer macro outlook, strategists said corporate earnings could still prove relatively resilient. “We think EPS estimates could again prove more resilient than real GDP,” they wrote, noting that higher energy profits, weaker currencies and elevated inflation can support nominal earnings even if economic growth slows.