Goldman Sachs HALO Strategy Enters Prolonged Battle Phase as Multiple Institutions Raise European Equity Targets
N.R. Finch
Goldman Sachs says heavy-asset stocks are shifting from a valuation story to an earnings story; Europe's STOXX 600 has outperformed the S&P 500 by roughly 7 percentage points since mid-March, and Barclays, Deutsche Bank, and JPMorgan have all raised year-end targets — signaling a rotation that may have legs.
What is the HALO trade, and why does it keep coming up?
HALO is Goldman's acronym for Heavy-Asset, Low-Obsolescence — companies that own power plants, factories, and aircraft, not brands or algorithms.
Strategist Guillaume Jaisson says investors are still underweight the return of physical assets to strategic importance. This means → most capital hasn't caught up yet; the trade is far from crowded.
Year to date, Goldman's European heavy-asset basket is up 15%; its light-asset basket is down 2%. In plain terms = the companies with real capacity are rising while the asset-light peers are falling — the gap is already stark.
What drives the next leg?
Jaisson's central call: the next phase does not need further multiple expansion — it only needs earnings to deliver. This means → even if the market stops paying a higher price-to-earnings ratio, profits alone can support the stocks.
Earnings-revision data backs this up — the heavy-asset basket has the strongest upward revisions of any group this year.
He concedes the bar is high: once the driver shifts from valuation to earnings, dispersion within heavy-asset names widens — not every name will win.
Why is Europe the biggest beneficiary?
Since mid-March, the STOXX 600 has outperformed the S&P 500 by about 7 percentage points; over the past month it rose 4.2% versus just 0.8% for U.S. equities.
EPFR data shows European equity funds took in over $12 billion in net inflows over four weeks, while U.S. tech funds saw nearly $9 billion in net outflows. This reflects a systematic reallocation from U.S. tech into European cyclicals.
Falling oil prices add a tailwind: airlines, logistics, and autos — cyclical sectors with heavy European index weight — see lower costs and better earnings prospects, a dynamic that barely registers in the tech-heavy U.S. market.
Which names are in each basket?
Goldman's heavy-asset basket includes Infineon, Rolls-Royce, and Airbus; the light-asset basket includes Adidas, British American Tobacco, and Danone.
Jaisson stresses he is not bearish on AI or asset-light models — but believes relative valuations and fund flows have become extreme. In plain terms = it's not that light-asset companies are bad; it's that the price already overdraws their upside.
The core HALO logic: as physical-asset scarcity gets repriced, the premium for earnings certainty will persist.
What are other major banks saying about European equities?
Barclays raised its STOXX 600 year-end target from 620 to 670, ending its underweight, citing falling oil and a potential U.S.–Iran deal that could reduce stagflation risk.
Deutsche Bank set a 2026 year-end target of 650, upgrading Europe from neutral to overweight and forecasting 12%–16% gains driven by double-digit profit growth and still-modest valuations.
JPMorgan: analyst Mislav Matejka on June 29 raised his target from 630 to 680, implying roughly 7% upside. This means → all three houses agree on direction; they differ only on magnitude.
What could break this trade?
A sharp global slowdown — heavy-asset sectors carry high operating leverage, so earnings swings get amplified; what rises fast can also fall hard.
Renewed Middle East conflict — an oil-price spike would directly pressure European cyclicals, reversing the tailwind from lower crude.
A fresh AI breakthrough — capital could snap back to tech stocks overnight, interrupting the rotation. In plain terms = if a new DeepSeek moment arrives, market attention will pivot instantly.
The upcoming earnings season is the decisive test: whether profits actually deliver the upgrade Goldman describes will determine if HALO is an endurance race or a one-wave trade.
Content is for reference only, not financial advice.