Goldman Sachs: Markets Overprice Rate Hikes, Multi-Asset Rally Possible by Year-End

Goldman Sachs strategists said markets are pricing in an overly aggressive global monetary tightening cycle, arguing that only two rate hikes are likely versus the four currently expected, setting up a potential synchronized year-end rally across stocks and bonds. Senior advisor Dominic Wilson and global risk head Josh Schiffrin said on a Goldman podcast that oil prices are the key variable. Should energy costs retreat, inflation expectations could cool and lift multiple asset classes simultaneously. Schiffrin said the oil spike was among 2026's biggest surprises, and markets have already priced a full tightening cycle. Wilson's base case: one more hike in October 2026, then an extended pause. Schiffrin noted the 10-year Treasury yield has topped 5% and 30-year real yields exceed 3%, making bonds increasingly attractive, though a reversal still needs a catalyst — most likely falling oil. Wilson cited AI-driven corporate financing demand and wider fiscal deficits as structural drivers keeping long-end yields elevated. Near-term, the dollar may strengthen on Fed hawkishness, while ultra-long bonds offer value at current real yields.