08:52 AM EDT, 03/20/2026 (MT Newswires) -- (Updates with medium-term return targets for asset and wealth division in fifth paragraph.)

Goldman Sachs Group ( GS ) expects an upswing in mergers and acquisitions activity this year despite the impact of the Middle East conflict, Chief Executive David Solomon said Friday in an annual letter to shareholders.

Goldman sees "the potential for a more constructive operating environment," based on factors such as fiscal stimulus in developed economies, monetary easing, AI capital investment, and a more balanced regulatory regime in the US, Solomon said in the letter.

Goldman also expects strategic transactions to accelerate this year as the regulatory change causes boards and CEOS to adopt a "much more front-footed approach" to executing strategic deals.

"We expect this upswing to continue -- though a protracted war or another exogenous event could, of course, change the current sentiment," Solomon said.

Goldman's Asset & Wealth Management division is targeting returns of 17% to 19% over the next three to five years. "While the bar for M&A remains very high, we will continue to look for ways to accelerate growth in AWM," Solomon said.

The executive also highlighted the importance of the US-China relationship. "Given how entwined they are, it is important that the US and China reach a new modus vivendi, not just for the next 12 months, but rather for the next 10 to 20 years," he said.