Value stocks could remain in favor in the months ahead if U.S. economic momentum strengthens, according to analysts at Goldman Sachs.
Value shares typically represent well-established, financially resilient companies that trade at relatively low prices compared with their underlying fundamentals, often below estimated intrinsic value.
In a research note, Goldman said its sector-neutral measure tracking the performance of low-valuation stocks versus their higher-valuation counterparts has “continued to outperform” at the start of the year. The indicator delivered a 15% return in the second half of 2025, according to Goldman analysts including Ben Snider and Ryan Hammond.
The bank expects inflation-adjusted U.S. economic growth to accelerate to above 3% in the first half of 2026. Such an environment, the analysts said, “typically erodes the valuation premium of companies with strong secular growth and ‘quality’ attributes in favor of lower valuation stocks.”
Historical data supports that view. Since 1980, Goldman’s low-valuation stock basket has generated average returns of about 14% over 12-month periods marked by faster economic growth — roughly double the gains seen during phases of steady or slowing expansion.
With monetary policy remaining “friendly,” an acceleration in growth “should narrow the wide current dispersion across earnings fundamentals and valuation multiples, supporting” the performance of Goldman’s low-valuation stock gauge, the analysts added.
That said, Goldman cautioned that the current cycle’s value rally is unlikely to match the scale of the strongest past episodes. Both the length and size of the outperformance are expected to “likely fall short of the largest value rallies in the past,” such as the 35% surge seen in 2021 and early 2022.
“In addition, the disparate effects of artificial intelligence investment and adoption on earnings will likely keep fundamental and valuation dispersion wider than average and provide strong tailwinds for some high valuation growth pockets of the market,” the analysts said.