Goldman Sachs says stick with Asia's winners, keep diversifying into commodities
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Asian stocks still have room to run even after a blistering first-half rally, while investors should continue diversifying into commodities as geopolitical shocks reinforce long-term demand for metals and energy infrastructure, Goldman Sachs said. The Wall Street bank highlighted that the same structural themes driving Asia's equity outperformance — artificial intelligence, power infrastructure and defense spending — are also strengthening the case for commodities, particularly copper and gold. In its second-half Asia equity outlook, Goldman urged investors to "stick with the winners," arguing that earnings growth, rather than valuations, remains the dominant driver of markets. The bank retained an overweight recommendation on North Asia, favoring South Korea, Taiwan, Japan and China's domestic A-share market, alongside technology hardware, capital goods and banks. "The semiconductor memory supercycle is one of the most powerful and prominent themes that is still not fully priced," the bank's experts wrote. Goldman expects the MSCI Asia Pacific ex-Japan Index to deliver mid-teen returns in the second half, supported by projected earnings growth of 60% in 2026 and 22% in 2027. The bank said close to 80% of year-to-date regional market performance can be explained by earnings growth or revisions to earnings growth forecasts, adding that markets are "trading earnings to a greater extent than before." Rather than rotating into lagging sectors after technology's outsized gains this year, Goldman argued investors should remain focused on structural winners including AI infrastructure, power generation, defense, capital-intensive industries and selected China themes. Those same themes also underpin Goldman's latest commodity outlook. Following months of disruption in the Strait of Hormuz, Goldman said investors should continue diversifying into commodities even as oil prices retreat after the reopening of the shipping route. "We think that the Iran conflict ultimately reinforces many of the themes supporting power and metals demand, more so than oil and gas," strategists said. Separately, the bank argued that the growing emphasis on energy security, artificial intelligence infrastructure, electrification and higher defense spending will continue to bolster demand for industrial metals including copper, lithium and aluminum, alongside investment in electricity grids and power generation. The bank expects demand growth in copper to continue outpacing mine supply for years as investment in electricity networks, renewable energy, electric vehicles, defense and data centers accelerates. It recently lifted its end-2026 London Metal Exchange copper forecast to $13,735 a metric ton and maintained that prices may need to reach around $15,000 by 2035 to incentivize sufficient new supply. Gold also remains a favored allocation despite its strong rally since 2022. Goldman continued to forecast bullion reaching $4,900 an ounce by the end of 2026, citing sustained central-bank buying as emerging-market reserve managers diversify away from traditional reserve assets. Although higher interest rates could temporarily weigh on investor demand through exchange-traded funds, the bank said geopolitical risks and concerns over fiscal sustainability should continue supporting prices over the medium term.