The case for US stocks remains compelling despite the pressure from higher yields, underpinned by a blend of supportive fundamentals, structural tailwinds from technology, and corporate actions that could sustain demand for equities through 2025. While recent rate increases have historically compressed near-term stock performance, the long-run setup for US equities carries meaningful potential, according to Mike Washington, an equities sales trader with Goldman Sachs Global Banking & Markets. His view centers on a disciplined reconciling of the short-term headwinds with longer-term drivers, suggesting that a durable double-digit return path is plausible as we move through the year ahead.
Rising Yields and the Near-Term Path for US Equities
There has been a material move higher in yields, a development that Washington notes as one of the defining features of the current market environment. He emphasizes that when rates climb at this pace, equities have tended to underperform in the immediate aftermath—often over the course of the next month. This is not a negligible dynamic; it reflects how investors recalibrate their discount rates and growth expectations in the face of higher borrowing costs and a shifting macro regime. Yet, embedding this near-term constraint within a broader strategic frame is essential for appreciating why the equity market can still be positioned for strength later in 2025.
In Washington’s assessment, there is a meaningful amount of favorable momentum feeding into the equity landscape for the year ahead. He points to several interlocking factors that could tilt the balance back toward risk assets after the initial rate-driven soft patch. One of the central pillars he highlights is the incremental upside embedded in AI-related advances, which could begin to lift earnings visibility and productivity across a wide spectrum of companies. The AI wave is not confined to one sector; rather, it represents a broad technological upgrade that could improve margins, accelerate revenue opportunities, and expand the pool of growth narratives that investors can latch onto. This unfolding dynamic, in turn, supports a constructive stance on equities even when the rate backdrop remains elevated or volatile.
Another important element Washington stresses is the heightened demand for equities from corporate balance sheets and strategic decision-making. In particular, he notes that corporate repurchase authorizations rose to nearly a record high in 2024, signaling a robust willingness among companies to buy back a significant portion of their own shares. The implication is clear: corporate repurchases provide a powerful source of demand for equities, supporting stock prices and contributing to earnings per share (EPS) dynamics through reduced share count. This mechanism can also stabilize valuations during periods of uncertain macro momentum by delivering a consistent buying floor. With buybacks on the table, equities can remain an attractive vehicle for capital allocation in an environment where growth catalysts may be uneven.
Washington also comments on the sentiment backdrop, acknowledging that investor psychology can shape the path of markets in the near term. He observes that sentiment had been stretched into December, but importantly, it has pulled back from historic highs since then. This easing of euphoric positioning is not a sign of weakness alone; it can create the space for more sustainable upside as earnings delivery and macro resilience validate investors’ continued engagement with equities. The net takeaway from his near-term read is that while the rate environment creates periodic headwinds, the structural and policy-driven tailwinds remain supportive enough to sustain a constructive stance on US equities over the course of 2025.
Ultimately, Washington’s view that “when it’s all said and done,” the market could experience another double-digit return year, rests on a composite outlook. It hinges on a combination of stabilizing macro momentum, a broadening of AI-enabled productivity gains, and the ongoing discipline of corporate capital allocation that keeps demand for equities robust. He frames 2025 as a year in which the market can reconcile the tension between higher short-term yields and longer-term beneficiaries of technological advancement and corporate optimization. This balance—between near-term headwinds and longer-term catalysts—forms the backbone of his positive assessment for the year ahead.
The broader market structure supports this nuanced view. Global and domestic demand streams, including consumer resilience, service sector expansion, and continued investment in digital capabilities, can feed through to earnings growth in a way that offsets some of the rate-induced pressure. Moreover, as companies adjust their capital structures, the combination of debt cost management and equity-based financing can create a favorable environment for equity markets to navigate a higher-for-longer rate regime. The synthesis of these elements—yield dynamics, AI-driven productivity, and corporate demand for equities—points to a scenario in which the immediate risk of underperformance due to rising rates gradually gives way to a more resilient, upside-driven path.
From a practical investment standpoint, these factors translate into a boardroom-level narrative for portfolio construction. Investors may seek to balance the sensitivity of traditional value equities to rate changes with growth and technology-oriented stocks that could benefit from AI-driven efficiency gains. A diversified approach that blends high-quality, cash-generative businesses with innovative growth stories could offer resilience amid rate volatility while preserving exposure to the secular drivers summarized above. In this context, the near-term softness driven by yield moves might be viewed as a temporary calibration rather than a lasting drag on longer-term equity performance.
Washington’s articulation reflects a careful calibration of risk and opportunity. He recognizes the legitimate risk posed by rising yields and the potential for short-term stock drawdowns but emphasizes that the market’s longer-term trajectory remains supported by powerful structural shifts and corporate behavior. The message is not that higher rates are inconsequential; rather, it is that the aggregate set of catalysts for 2025—AI adoption, corporate buybacks, and a measured improvement in sentiment—can collectively propel equities toward meaningful gains. This view invites investors to look beyond the immediate rate-driven moves and focus on the durable drivers that can sustain a constructive equity market environment throughout 2025 and beyond.
To summarize this section, Washington’s perspective is that rising yields have created a palpable near-term implication for US equities, increasing the likelihood of a temporary underperformance window. Yet, the same yields are not a barrier to a longer-term upside narrative. The convergence of AI-driven productivity, healthy corporate buyback activity, and a less exuberant but more grounded sentiment backdrop provide a multi-layered case for continued equity exposure in 2025. Investors who can navigate the short-run volatility while anchoring to these longer-term catalysts may position themselves to capture the anticipated double-digit gains over the course of the year, as the market transitions from the initial rate-induced phase toward a steadier cadence of earnings growth and multiple expansion supported by technology-enabled efficiency gains.
AI as a Growth Catalyst and Broad-Based Equity Demand
Beyond the near-term dynamics of yields, Washington highlights a transformative driver that could begin to reshape corporate profitability and equity demand: the rise of AI. The acceleration of artificial intelligence capabilities promises to unlock productivity improvements, optimize operations, and enhance decision-making across a wide variety of industries. In his view, AI’s impact is not limited to a select handful of sectors; instead, it has the potential to become a broad-based driver of value creation, enabling a broad swath of companies to realize better top- and bottom-line results over time. This broad applicability is a critical distinction when considering the potential for durable earnings growth and the consequent support for equities.
The AI narrative is anchored in several practical channels through which companies can benefit. First, AI can elevate labor productivity by automating routine tasks, augmenting complex decision processes, and enabling faster product development cycles. As a result, firms can pursue higher output with comparatively stable or modestly increased labor inputs, improving operating margins and return metrics. Second, AI can optimize the use of capital by enhancing capital allocation decisions, forecasting demand more accurately, and improving inventory management. This translates into lower costs and higher asset efficiency, contributing to both earnings quality and resilience during periods of macro uncertainty. Third, AI-driven innovations can unlock new revenue streams and create competitive differentiation, supporting sustainable pricing power and growth trajectories in diverse markets.
The breadth of AI’s potential means the beneficiaries are not confined to technology firms alone. Washington points to the likelihood that a wide range of companies could experience improved demand for their equities as AI adoption deepens. This is especially relevant as businesses across sectors—industrials, consumer, financials, healthcare, and beyond—integrate AI into their operations and strategies. The implication for investors is that the equity universe could experience broader participation in growth narratives, rather than a narrow subset of high-growth tech names driving performance. A more inclusive AI uplift could reduce dispersion in returns, as productivity gains become more evenly distributed and reflected in corporate earnings.
From an investment perspective, the AI catalyst supports a constructive long-run outlook for equities by potentially expanding the set of viable growth stories and improving earnings visibility. As AI capabilities mature, companies that successfully deploy these technologies can translate technological improvements into tangible financial outcomes. This translates into more stable cash flows, better margins, and, importantly, improved confidence among investors about future earnings trajectories. The resulting upgrade in earnings expectations can support valuations and contribute to a more favorable risk-reward balance for equities, particularly if the AI rollout aligns with ongoing improvements in macro conditions and corporate balance sheets.
The potential macro-earnings synergies from AI extend to multiple dimensions. First, AI can shorten product development cycles and accelerate time-to-market for new offerings, enabling faster revenue realization and earlier recoupment of investment costs. Second, AI-enabled optimization can improve supply chain resilience, reducing exposure to disruption and increasing capacity utilization. Third, AI can empower data-driven decision-making, allowing management teams to identify profitable growth opportunities and optimize pricing strategies in ways that were not feasible before. Collectively, these effects can contribute to higher sustainable growth rates for a broad spectrum of companies and provide a more favorable backdrop for equity markets.
Investors should also consider the policy and competitive landscape as AI scales. Regulatory considerations, data governance standards, and ethical implications can shape the speed and manner in which AI-driven advantages translate into real-world outcomes. Companies that navigate these dimensions effectively may be better positioned to translate AI investments into durable earnings momentum. Washington’s perspective implies a broader, more inclusive optimism: AI could become a secular amplifier of corporate value, underpinning a more robust equity market cycle in the years ahead, even as rate volatility persists in the near term.
A critical practical implication of this AI outlook is the potential for revised stock-price sensitivities to growth and productivity surprises. As AI-related earnings visibility expands, equities could exhibit more resilient performance in the face of macro headwinds, provided fundamentals remain solid. This does not imply an automatic rise in prices without risk; rather, it suggests that the market could discount improved productivity and revenue growth more readily, supporting a more favorable risk-adjusted return profile for equities. The AI narrative thus acts as a counterweight to the near-term rate-driven softness, enabling investors to maintain exposure to equities and participate in a likely broader-based growth cycle driven by technology-enabled efficiency.
The AI-driven lift in corporate earnings could also interact positively with the buyback dynamic described earlier. When AI investments translate into higher cash flows, companies may have even more capacity to sustain repurchase programs or to deploy capital in ways that amplify shareholder value. This synergy helps explain why Washington views AI as a critical, cross-cutting factor in the 2025 equity outlook. It provides a structural underpinning for a more constructive risk environment and a more compelling long-run investment narrative, reinforcing the case for equities in a market characterized by ongoing yield volatility and evolving macro risks.
In sum, the AI story strengthens the case for a resilient, long-run equity market trajectory. While the near-term headwinds from rising yields may momentarily dampen stock performance, AI’s broad applicability across many industries and its potential to lift productivity and profitability provide a powerful, durable driver of earnings growth. When combined with the discipline of corporate buybacks and the broader demand environment, the AI-driven growth possibility contributes to a multifaceted, constructive framework for US equities in 2025. This expanded view encourages a diversified approach to equity investing, where both traditional growth-oriented and value-oriented names can participate in the upside, supported by a fundamental shift toward more productive and profitable corporate outcomes enabled by AI technologies.
Corporate Buybacks: Fuel for Equity Demand in 2025
A notable thrust in Washington’s articulation is the role of corporate repurchase authorizations as a driver of equity demand. The fact that buyback authorizations surged to near-record levels in 2024 signals a robust willingness by corporations to allocate a material portion of profits toward returning capital to shareholders through share repurchases. This behavior not only supports share prices by increasing demand but also has potential implications for EPS growth through a reduced share count. In other words, buybacks can be a structural, ongoing driver of per-share metrics that can, in turn, influence investor sentiment and valuation multiples.
The near-record level of buyback approvals reflects several underlying forces. First, corporate executives may view repurchases as an efficient use of capital, particularly in an environment where alternative investment opportunities might be perceived as limited or where balance sheets are resilient enough to absorb buybacks without compromising strategic flexibility. Second, buybacks can mitigate the dilution effects that occur when companies issue equity for acquisitions, employee compensation, or growth financing. By offsetting dilution, repurchases can help preserve existing shareholders’ ownership stakes and potential return streams, supporting a more favorable long-run earnings trajectory.
This backdrop matters because it touches directly on the supply-demand dynamics of the equity market. A strong repurchase program reduces the number of shares outstanding, which, all else equal, can lift earnings per share and support higher price-earnings multiples if investors interpret the improved metrics as sustainable. In turn, this can help maintain or even widen the appetite for equities among both professional and retail investors, reinforcing a positive feedback loop between buybacks and stock price performance. The practical implication is that corporations’ capital-allocation choices, including buybacks, materially influence market behavior by shaping the base of shares available to trade and the per-share profitability that investors monitor.
From a longer-horizon lens, buybacks can contribute to a more stable investment environment for equities by providing a consistent form of demand that is less sensitive to the vagaries of economic cycles. When buybacks are large and recurrent, they can dampen the volatility of supply and support a more predictable path for stock prices even when earnings growth temporarily slows. This is particularly relevant in a period of elevated yields, where investors seek structural, steady drivers of value rather than purely cyclical catalysts. Buybacks thus complement other growth and productivity themes by offering a predictable floor in the market’s demand dynamics.
Washington’s framing suggests that buybacks not only support stock prices but also can interact with AI-driven growth to compound shareholder value. In a scenario where AI investments favorably impact cash flow generation, companies could sustain or increase their repurchase activity while also pursuing new growth initiatives. The synergy between higher cash generation, disciplined capital allocation, and share repurchases can produce a virtuous circle: better per-share results, enhanced investor confidence, and a more favorable rating in equity markets. This dynamic is central to understanding why buybacks remain a critical component of the equity market’s structural support in 2025 and beyond.
Investors should consider how buybacks influence risk-return profiles in portfolios. The presence of a robust buyback program can provide a stabilizing influence during periods of macro volatility, as buyback-driven support can offset some downside risks by providing a reliable source of upward price pressure. This is not a blanket guarantee of positive returns, but it does suggest that buybacks, when sizeable and sustained, can be a meaningful contributor to total shareholder return in a multi-asset framework. For risk-managed investors, recognizing the role of corporate repurchases in supply-demand dynamics can inform position sizing, sector allocations, and timing considerations as part of a comprehensive strategy for 2025.
The integration of buybacks with AI-enabled earnings growth forms part of the broader narrative Washington outlines: corporations are deploying capital more efficiently, returning capital to shareholders when appropriate, and leveraging technology-driven productivity gains to sustain earnings momentum. This triangulated approach—combining AI-generated value creation with disciplined capital allocation—can yield a more durable path for equities to deliver outsize returns even when rate volatility persists. The buyback channel reinforces the thesis that equities can remain a central component of diversified portfolios, given the quality and consistency of demand that corporations inject into the market.
As market participants parse the implications of 2024’s buyback surge for 2025, the takeaway is clear: corporate repurchases are a tangible, ongoing source of equity demand that complements other structural catalysts. With AI potential expanding earnings visibility and macro conditions stabilizing in ways that may favor equities, buybacks contribute to a cohesive framework for a constructive equity environment. Investors should monitor ongoing corporate communications around buyback programs, track changes in authorization levels, and evaluate how these programs align with broader strategic shifts, such as AI investments and digital transformation initiatives. The convergence of these factors helps explain why firms’ capital-allocation decisions will continue to shape the equity market’s direction in the year ahead.
In this context, the combination of AI-driven growth prospects and continued buyback activity creates a nuanced, multi-layered foundation for the 2025 equity landscape. The near-record buyback authorizations observed in 2024 indicate that corporations are committed to stewardship of shareholder value through disciplined equity repurchases, a dynamic that interacts with AI-enabled productivity to produce leverage on earnings per share and price discovery processes. This synergy between technology and capital allocation reinforces Washington’s broad bullish stance: equities can weather yield headwinds and still deliver meaningful gains, supported by corporate actions and the technology-driven productivity wave. Investors who recognize and incorporate these dynamics into their strategies can position themselves to benefit as 2025 unfolds.
Investor Sentiment, Tactical Positioning, and the Case for a Double-Digit Year
Beyond the earnings and capital-allocation mechanics, Washington also addresses the psychological and sentiment dimensions that influence market behavior. Investor sentiment in December, he notes, was stretched, but it has retreated from those highs as markets absorbed the latest rate and growth signals. This sentiment normalization can be a constructive counterbalance to momentum-driven episodes and may foster a more sustainable uplift as corporate earnings data solidify and AI-enabled improvements translate into observable results. The implication is that while sentiment alone does not drive returns, it interacts with fundamental developments to shape the market’s trajectory and the path of risk assets through the year.
From a portfolio construction perspective, sentiment dynamics necessitate a disciplined approach to risk management. When investor positioning is overly optimistic or complacent, a period of rebalancing can temper expectations and re-anchor risk controls. Conversely, when sentiment has cooled after a period of extension, it can create opportunities for stock selection that favors quality, durability, and earnings visibility. Washington’s framework suggests that investors should remain selectively constructive, focusing on companies with strong cash flows, credible AI-enabled growth stories, and prudent capital-allocation practices, including meaningful buybacks. In other words, sentiment should be interpreted as one factor among several that shape sectoral exposure, stock selection, and risk posture.
The core narrative Washington advances centers on the probability of another double-digit return year for the US equity market. He emphasizes that, when all elements are weighed together—the yield trajectory, AI productivity gains, buyback intensity, and a more grounded sentiment backdrop—the odds are favorable for an earnings-driven or multiple-expansion-driven upside that could translate into two-digit returns in aggregate across a diversified equity portfolio. This assessment does not imply guaranteed outcomes or a straight line higher; rather, it signals that the combination of beneficial fundamentals and strategic corporate actions can sustain a robust equity market performance despite ongoing macro and rate-related challenges.
Investors should also consider the potential volatility that could arise from external shocks or shifts in policy dynamics. A variety of scenarios could temporarily alter the pace of gains, including unexpected inflation flares, geopolitical tensions, or a change in central bank communication that accelerates or decelerates the pace of rate normalization. Washington’s careful framing acknowledges these risks while underscoring that the core set of drivers—AI-enabled productivity, buybacks, and a stabilizing sentiment environment—remains in place to support a constructive equity environment. This balanced view invites a strategic approach to asset allocation that emphasizes resilience, diversification, and a focus on high-quality earnings growth that is more likely to withstand unpredictable market shifts.
In practical terms, the anticipated 2025 path for US equities could favor a blended portfolio approach. Investments in growth-oriented exposures unmarred by excessive risk, supplemented by high-quality cyclicals and defensive dividend payers capable of leveraging AI-driven improvements, may be well-suited to navigate a rate-sensitive backdrop. The inclusion of buyback-informed equities may also help reduce downside risk and contribute to a steadier trajectory during periods of macro uncertainty. The key is to maintain flexibility to adapt to evolving data and to rebalance as AI-enabled productivity and corporate earnings narratives become clearer over time. A well-structured strategy acknowledges the potential for volatility while staying aligned with the longer-run drivers that Washington highlights.
Finally, it is important to reflect on the broader implications of these insights for market participants. The intersection of higher yields, AI-driven productivity, and corporate buybacks presents a nuanced, multi-factor framework that can shape market behavior across sectors. Rather than viewing any single driver in isolation, investors can benefit from recognizing how these elements reinforce one another. This holistic perspective supports a disciplined investment approach that seeks to capture the upside potential of AI-enabled growth while managing the near-term risk associated with rate movements. Washington’s view offers a roadmap for navigating 2025 with a thoughtful balance between risk control and the pursuit of meaningful returns, grounded in a robust understanding of the interplay between technology, capital allocation, and macro dynamics.
Conclusion
In sum, the outlook for US stocks sits at an intersection of near-term rate dynamics and longer-term, productivity-driven growth catalysts. Mike Washington of Goldman Sachs emphasizes that the current rise in yields has historically been associated with short-term equity underperformance, yet the market’s longer-term prospects remain favorable. The AI revolution emerges as a central engine, with potential to uplift earnings across a wide spectrum of companies, not just those in the technology sector. This broad productivity uplift can bolster corporate profitability and, in turn, sustain elevated equity demand as AI adoption deepens and expands into new use cases.
Additionally, corporate repurchases—signaling strong capital-allocation discipline—provide a consistent source of demand that can support stock prices and improve per-share metrics. The near-record levels of buyback authorizations in 2024 imply a robust commitment to shareholder value, a factor that complements AI-driven earnings growth and can help stabilize market participation in the face of rate volatility. Investor sentiment, while having experienced stretched levels in December, appears to have cooled to more sustainable levels, which can foster a more credible foundation for continued equity participation if earnings and productivity improvements materialize as expected.
Taken together, these elements form a cohesive case for a constructive equity environment in 2025, with the potential for another double-digit return year as the interplay of AI-enabled efficiency, buyback-driven demand, and a balanced sentiment backdrop helps to offset the near-term headwinds from higher yields. Investors who carefully calibrate their exposure to value, growth, and high-quality income-generating stocks—while prioritizing companies with credible AI adoption plans and disciplined capital allocation—may position themselves to benefit from a durable, multi-year upcycle in US equities. The overarching message is one of guarded optimism, anchored in tangible corporate actions, technological progress, and a measured response to the yield landscape, pointing toward a favorable trajectory for US stocks as the 2025 horizon unfolds.
