Goldman Sums Up The Year In Three Little Words

2025 was a particularly interesting year, according to Goldman Sachs trader Chris Hussey, because it was characterized by 3 words all at once: noise, quiet, and transition.

• Noise came in the form of a second Trump Administration and the implementation of sweeping policy changes including DOGE, tariffs, and a brand of populist stimulus that was new for markets to digest. The biggest news came on the tariff front where the economy was able to digest a Great Depression style tariff increase with relative ease -- partly because the tariffs put in place turned out to be much lower than the ones originally proposed back on Liberation Day (Apr-2). Markets were also able to digest sweeping efforts to shrink the size of the Federal government culminating in the longest ever federal government shutdown this fall that pushed net non-farm payroll additions into negative territory in October. Looking ahead, we see less policy noise as the Supreme Court coupled with a desire to curb inflation may curtail some tariffs and stimulate some fiscal spending. And finally on the noise front, a new brand of stimulus emerged in 2025, specifically targeting individual companies with everything from price controls to product sales restrictions and even some direct stimulus -- and also included the passage of a more conventional government stimulus bill in early July that paves the way for tax relief in 2026.

• Quiet came in the form of more of the same. While a lot was transpiring on the policy and geopolitical front, even more rolled along just as it has been doing for several years now. The Russia-Ukraine war continues. Market concentration only intensified (now 41% of the S&P 500's market cap is in the top 10 stocks). Upward earnings momentum for the S&P 500 rolled right through the noise, with our strategy team's S&P 500 EPS estimates for 2026 rising 6% over the course of the year to $305 today from $288 at the beginning of the year.

• Transition was a third operative word for 2025. We of course had the President transition from Biden to Trump. But focusing on markets, we also saw transitions develop in the two biggest themes we were focused on going into 2025: AI and GLP-1s. For AI, signs are emerging of a transition within the infrastructure phase that incorporates custom chips in addition to NVDA's chips. Plus there is a transition taking place from the infrastructure phase to later phases of the AI investment cycle, including potentially the AI productivity beneficiaries. And for GLP-1s, we saw a transition in 2025 favoring LLY's drug over NOVO's, and we are also seeing a potential transition across Healthcare to new diseases being treated by new classes of drugs (see top 10 themes below).