Balancing Innovation and Inflation in Portfolios

Research evidence excerpt

Balancing Innovation and Inflation in Portfolios

PORTFOLIO STRATEGY RESEARCH | 10 July 2026 | 5:00 PM BST

NO. 77GLOBAL STRATEGY PAPER

Christian Mueller-Glissmann, CFA

+44(20)7774-1714

christian.mueller-glissmann@gs.com

Goldman Sachs International

Andrea Ferrario

+44(20)7552-4353

andrea.ferrario@gs.com

Alessandro Giglio

+44(20)7051-6240

alessandro.giglio@gs.com

Giovanni Ferrannini

+44(20)7051-2589

giovanni.ferrannini@gs.com

• Global financial assets have performed strongly in the last 3 years after the large Elena Porfidia

drawdown in balanced portfolios in 2022. Equities have performed particularly +44(20)7051-5240

strongly, with long-term ex post equity risk premia nearing the Golden 20s and 50s elena.porfidia@gs.com

and the AI boom boosting Tech stocks. As a result, the 'World Portfolio' has drifted Goldman Sachs International

towards US assets, equities and the Tech sector in recent years.

Peter Oppenheimer

• Structural cycles linked to innovation or inflation have historically often driven +44(20)7552-5782

peter.oppenheimer@gs.com prolonged trends in performance across assets, regions and sectors and, as a result, Goldman Sachs International

the composition of the 'World Portfolio' has materially drifted – increasing risk in the

case of structural breaks. The current AI capex boom increases the risk that falling

profitability for mega-cap Tech stocks materially drags on equity returns before

benefits from AI adoption show up.

• And higher inflation volatility and fiscal risks are also creating headwinds for

balanced portfolios, with less of a buffer from bonds and more risk of rate shocks.

Based on our macro-based return forecasting framework, in all but an optimistic

'Goldilocks + AI boom' scenario, expected long-term equity returns are below the