Goldman Sachs said Asian stocks still have room to rise after a strong first-half rally, but investors should continue to diversify into commodities as geopolitical shocks drive long-term demand for metals and energy infrastructure. Wall Street banks highlighted that the same structural themes driving the outperformance of Asian stocks – artificial intelligence, power infrastructure and defense spending – strengthened the case for commodities, particularly copper and gold. In its outlook for Asian stocks for the second half of the year, Goldman urged investors to “stick to the winners” and argued that earnings growth, rather than valuations, remained the market’s key driver. The bank maintained its North Asia overweight recommendation favoring the domestic A-share markets of South Korea, Taiwan, Japan and China, along with technology hardware, capital goods and banks. “The semiconductor memory supercycle is one of the strongest and most prominent themes yet to be fully priced in,” the bank’s experts wrote. Goldman expects the MSCI Asia-Pacific index (ex-Japan) to return mid-teens in the second half of the year, supported by expected earnings growth of 60% in 2026 and 22% in 2027. The bank said that nearly 80% of the regional market’s performance year-to-date can be explained by earnings growth or revisions to earnings growth forecasts, adding that the market is “trading significantly more in earnings than previously.” Goldman argued that investors should continue to focus on structural winners such as AI infrastructure, power generation, defense, capital-intensive industries, and some China themes, rather than shifting into laggard sectors following this year’s big tech rally. These same themes underpin Goldman’s latest product outlook. After months of disruption in the Strait of Hormuz, Goldman said investors should continue to diversify into commodities even if oil prices fall after the route reopens. “We believe the Iran conflict will ultimately strengthen many of the themes that support demand for power and metals more than oil and gas,” the strategists said. Separately, the bank asserted that increased emphasis on energy security, artificial intelligence infrastructure, electrification and increased defense spending will continue to increase demand for industrial metals such as copper, lithium and aluminum, alongside investment in the grid and power generation. The bank expects copper demand growth to continue to outpace mining supply as investment in power grids, renewable energy, electric vehicles, defense and data centers accelerates. The company recently raised its 2026 end-2026 London Metal Exchange copper price forecast to $13,735 a tonne, arguing that prices may need to reach around $15,000 by 2035 to encourage enough new supply. Gold also remains a priority allocation despite its strong rally since 2022. Goldman continued to expect bullion to reach $4,900 an ounce by the end of 2026, citing sustained central bank purchases as emerging market reserve managers diversify away from traditional reserve assets. The bank said that while rising interest rates may temporarily weigh on investor demand through exchange-traded funds (ETFs), concerns over geopolitical risks and fiscal sustainability will continue to support prices in the medium term.
