GS flags interest rates and AI disruption as risks to long-term equity demand
Investing.com — Goldman Sachs has warned that the sustainability of household demand for U.S. equities could become increasingly vulnerable to higher interest rates and the economic disruption associated with artificial intelligence. The brokerage has identified both as major uncertainties for equity valuations over the coming years.
The bank said household demand had become a critical pillar supporting the US stock market, with investors purchasing $840 billion of equities during the first half of 2026, more than offsetting weaker demand from US corporates.
Households directly own 42% of the US equity market and control a majority when indirect holdings through retirement accounts, mutual funds and ETFs are included.
However, Goldman said the trajectory of interest rates and the extent of AI-related disruption would rank among the most important determinants of how household allocations evolve.
Higher yields on cash and bonds can make equities less attractive, while the broader economic implications of AI remain an important source of uncertainty for long-term investment behaviour.
The risks come as household equity allocations have climbed to a record 55% of financial asset portfolios, alongside the strong performance of equities relative to other asset classes.
The concentration of ownership also presents an important consideration – the wealthiest 10% of households hold 87% of total household equity assets, making their investment decisions particularly influential.
Goldman’s baseline forecasts remain supportive for 2027, assuming a stable labour market and modest declines in borrowing and market yields. The bank noted that equity fund flows have historically improved alongside rising household wealth, falling unemployment and reduced recession concerns.
Meanwhile, assets held in 401(k) plans have increased from 13% of the U.S. retirement market in 1995 to 21% currently, with younger participants allocating a greater proportion of their retirement balances to equities.
The demand outlook is becoming more consequential as corporate supply increases. U.S. public and private companies issued a net $175 billion of equity in the first half of 2026, while Goldman expects net public equity supply, including expiring lockups, to rise next year by its largest amount since 2000.
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