Goldman Sachs: The Best Place to Invest Isn't the U.S. Anymore

Where is the best place to invest globally over the next year and five years?

 

Goldman Sachs Wealth Management has an answer, and it’s not the United States. Instead, it’s emerging market equities.

Emerging Markets as the Top Pick

In a recent report, Sharmin Mossavar-Rahmani, Chief Investment Officer at Goldman Sachs Wealth Management, wrote:

 

“Emerging market equities offer the highest expected base case return at 8%, which we assign a 55% probability. We see a 20% chance that EM returns exceed expectations and a 25% probability of mid-to-low single-digit negative returns.”

 

“Across all markets, we have the widest dispersion of expected returns for emerging market equities.”

 

Below is a look at the outlook for the next 12 months and five years from Mossavar-Rahmani and her team. The numbers above each bar represent the estimated annualized returns (for example, a 6% annualized return for EM stocks over the next five years).

Note: Average expected returns for major asset classes in 2026 and over the next five years. (Top chart: 2026, Bottom chart: 5-Year).

 

Goldman Sachs derived these forecasts by considering earnings growth, dividend yields, and expected changes in valuations.

 

As for other equity predictions from the team: U.S. stocks, represented by the S&P 500, rank second with an expected growth rate of 7% over the next 12 months and an average annual return of 6% over the next five years.

 

UK equities and the MSCI ACWI (All Country World Index) round out the top three and four spots for expected returns over the next five years, with average yields of 5%.

Don't Sweat U.S. Valuations

Despite U.S. stocks trading at historically high valuations, Goldman Sachs rejects the notion of a bubble, arguing that prices will remain elevated as the market continues to perform well.

 

“An important aspect of our U.S. equity assessment is the decline in U.S. economic volatility,” the bank stated. “We believe this lower volatility implies greater stability in corporate earnings, which in turn supports higher equity valuations.”

 

The report further noted: “Valuations alone have limited influence on the decision to stay invested or exit the market.”

 

Funds that provide exposure to the bank’s top expected performers include: the iShares MSCI Emerging Markets ETF (EEM), the SPDR S&P 500 ETF Trust (SPY), the Franklin FTSE United Kingdom ETF (FLGB), and the iShares MSCI ACWI ETF (ACWI).