Goldman Sachs reports that global markets are transitioning from a modern era of low inflation and globalization to a post-modern regime defined by higher volatility, elevated real interest rates, and increased state intervention. In this environment, the reliance on valuation expansion for returns is diminishing, making earnings growth per share the primary driver of market performance. Strategists Peter Oppenheimer and Sharon Bell emphasize that higher capital costs constrain multiple expansion, increasing cross-sectional return dispersion and elevating the value of active stock selection over passive beta exposure.

Data compiled by Goldman Sachs indicates that S&P 500 capital expenditures grew 38% year-on-year in the first quarter of 2026, while buybacks slowed to just 1%, reversing the post-financial crisis trend. AI-driven private capex and geopolitically motivated public investment are forming a supercycle, with major tech firms including Amazon, Meta, Google, Microsoft, and Oracle projected to spend approximately $75.5 billion in 2026, rising to $92 billion in 2027. This momentum is cascading into energy, industrial, and defense sectors, prompting recommendations for thematic baskets focused on AI, defense, power, and heavy asset-light organizations.