Goldman's latest report suggests that as the momentum of the U.S. economy might rise again, value stocks still have room to continue their "modest outperformance" in the coming months. The firm emphasizes that low-valuation targets have already strengthened in their relative performance against high-valuation peers since the start of the year.
Low Valuation Metrics Continue to Outperform: Roughly 15% Return in the Second Half of Last Year
Goldman states that the low valuation stocks it tracks continued to hold an advantage over high valuation stocks (sector-neutral) at the beginning of this year; this metric recorded a return of about 15% in the second half of 2025.
Macro Logic: If Growth Accelerates, the Premium for Growth and "Quality" May Be Squeezed More Easily
The core assumption of the report is that U.S. inflation-adjusted economic growth could accelerate to over 3% in the first half of 2026. Goldman believes that during strong growth phases, the market tends to reprice the valuation premium of long-term growth and "quality" characteristics, thereby increasing the preference for low-valuation stocks.
Historical Experience and Policy Background: Higher Win Rate for Value Stocks, But Impact May Not Replicate Past Rounds
Goldman's statistics show that since 1980, when economic activity accelerates in the following 12 months, the average return of its low valuation metric is about 14%, roughly double that of stable or slowing economic phases. The firm also mentions that if the monetary environment is relatively favorable, the gap between earnings fundamentals and valuation multiples has the opportunity to converge, thereby continuing to support the performance of value stocks.
However, Goldman also warns that the duration and magnitude of this upcoming relative outperformance may not match the strongest past value rallies (such as roughly a 35% increase in early 2021 and 2022).
Risk Warning: AI-Driven Divergence, Some High-Valuation Growth May Still Have "Stories and Earnings"
The report also points out that AI investment and application have uneven impacts on the profitability of different industries, potentially maintaining high fundamental and valuation differences over a longer period, and continuing to provide momentum for some high-valuation growth sectors. In other words, the balance between value and growth could be more of a "tug-of-war" rather than a one-sided switch.
