Heavy-asset companies are entering a new phase of the HALO trade where earnings delivery, not multiple expansion, will separate winners from losers, according to Goldman Sachs strategists.
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Goldman Sachs says heavy-asset stocks to extend 15% rally on earnings
Goldman Sachs strategists say heavy-asset companies are expected to deliver strong earnings this reporting season, extending their outperformance over light-asset peers as the HALO trade enters a second phase.
"Investors remain under-positioned for a world in which physical assets, infrastructure and industrial capacity regain strategic importance," Guillaume Jaisson, a strategist at Goldman Sachs, said.
A basket of European capital-intensive stocks has gained 15% year to date, driven by utilities and energy companies, while a gauge tracking light-asset stocks has fallen 2%. The divergence reflects a rotation away from high-valuation technology names toward companies with scarce physical assets, high barriers to entry and limited risk of obsolescence — the defining characteristics of the HALO theme. Pairing capital-intensive stocks long against capital-light stocks short has delivered a 20% return this year, Goldman data show.
The second phase will require companies to deliver on earnings rather than rely on multiple expansion, the strategists said. Data centers, semiconductors, utilities and defense are expected to account for more than 40% of total capital expenditure in 2026, up from 25% in 2022, supporting the view that the capex cycle has further to run.
Capex Cycle Broadens Beyond AI
The HALO theme — an acronym for heavy assets, low obsolescence — was flagged earlier this year by Josh Brown, CEO of Ritholtz Wealth Management, as the most important trade of 2026. Since then, the strategy has gained traction as artificial intelligence disruption fears drove investors toward companies whose physical assets are difficult to replicate and unlikely to become obsolete.
Goldman's buy-rated picks span five categories: infrastructure companies such as Enel and Veolia Environnement; basic materials including Shell and Air Liquide; aerospace and defense names like Airbus and BAE Systems; manufacturing and consumer platforms including Volvo and Nestlé; and the physical layer of technology, with ASML Holding and Deutsche Telekom among the selections.
The trade is global, and the strategists said the new phase of physical economy growth may favor Europe, Japan and parts of emerging markets more than the U.S., where equity markets remain more concentrated in capital-light sectors. Earnings estimates already reflect the divergence, with heavy-asset stocks seeing the largest upward revisions in 2026.
The S&P 500 has gained 10.1% year to date to 7,537, while the Nasdaq Composite has risen 12.4% to 26,121, driven largely by AI-related technology stocks. The 10-year U.S. Treasury yield has climbed 33 basis points this year to 4.50%, a move driven almost entirely by rising real rates rather than inflation expectations, according to Neuberger Berman's asset allocation team. Crude oil has gained 20.6% year to date, reflecting the energy security and industrial sovereignty themes that underpin the HALO trade.
This article is for informational purposes only and does not constitute investment advice.
[1] Goldman Sachs says the next rally in heavy-asset stocks will be driven by earnings, expects them to further outperform light-asset stocks[2] Double down on the HALO trade: Goldman says asset-heavy companies will keep beating the market[3] The trade of the year is entering a new phase, says Goldman Sachs. Here's what it means for stocks.[4] Goldman Says Earnings to Drive More Gains in Asset-Heavy Stocks[5] Asset Allocation Outlook Q3 2026: Staying Pro-Risk In A Broadening AI Cycle
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