Why Goldman Sachs thinks stocks will rip even higher

The market is signaling that geopolitics is becoming a volatility source rather than a trend breaker. That matters because when investors stop pricing an immediate macro shock, the leadership typically shifts from defensives and energy into long-duration growth with visible earnings compounding; the next leg higher is likely to be narrower and more quality-biased than the broad rally implies. The best-positioned names are those with direct exposure to capital spending cycles that cannot be easily delayed, especially AI infrastructure, power, and memory where supply discipline can turn incremental demand into outsized margin leverage.

The second-order read is that the rally is now dependent on earnings “proof” more than narrative relief. If the next two weeks of megacap and industrial guidance confirm that capex budgets are intact, the market can keep paying up for secular growers even if rates stay sticky and crude remains elevated. If not, the move likely stalls first in the highest-beta AI complex, where positioning is crowded and expectations are already elevated.

The contrarian angle is that the market may be underestimating how quickly energy-price fear can re-ignite if crude makes a fresh leg higher; the key threshold is not the current tape but whether input costs start contaminating margins and consumer sentiment. On the other hand, the consensus may also be overestimating the durability of a broad cyclical rotation: if growth slows and energy stays firm, the winners should be “picks and shovels” in digital infrastructure rather than the broad market beta names. That argues for staying long earnings resilience while fading the most economically sensitive parts of the index.