Goldman predicted a 17% rise in the S&P 500 in 2026. Why did it improve its forecast?

Investment bank Goldman Sachs raised its target forecast for the S&P 500 index for the end of 2026 from 7,600 to 8,000 points, writes Reuters. This implies a growth potential of more than 6% relative to the current level. The total return of the U.S. benchmark is expected to be 17% this year. Goldman coincided in this sense with the views of Morgan Stanley and Deutsche Bank, writes Bloomberg.

The main driver of further gains in equities will be continued growth in corporate profits, largely driven by the boom around artificial intelligence (AI), Goldman Sachs' team of analysts led by Ben Snyder said.

"Earnings growth has driven all of the S&P 500's returns this year, and we expect this momentum to continue in the coming months. The upgraded outlook reflects increased earnings estimates for companies following an exceptionally strong first-quarter reporting season," the strategists said in a note to clients (quoted by Bloomberg).

Investment Bank also raised its earnings per share (EPS) forecasts for companies in the S&P 500 Index, with the figure raised to $340 for 2026 (up 24% year-over-year) and $385 (+13%) for 2027.

According to Goldman analysts, beneficiaries of AI infrastructure investments will account for about half of the expected EPS growth this year. At the same time, growth in the estimated value of companies should be tempered by risks to forecasts, the bank believes.

"The combination of slowing earnings growth and continued uncertainty about both AI and the macroeconomic outlook should prevent valuations from rising significantly," the strategists wrote. - Sentiment around AI and interest rates pose risks in both directions"(quoted by Bloomberg).

This year, the S&P 500 index has already risen by almost 10% thanks to a rally in the technology sector. Investors are now focusing on the strong financial performance of companies, overshadowing the geopolitical and economic consequences of the conflict with Iran, Bloomberg notes.

With its new forecast Goldman Sachs only confirms the general "bullish" trend on Wall Street. Analysts of the investment bank joined the growing wave of positive assessments from colleagues, points out Reuters.

Thus, JPMorgan Private Bank believes that the new benchmark for the S&P 500 for 2027 could be the 9,000-point mark. The bank puts the index's rally down 22%, provided that the AI supercycle turns out to be bigger than previously thought, Business Insider reports. If AI helps accelerate productivity growth, corporate earnings could grow at a rate of over 10% without accelerating inflation, the bank believes.

"We've seen this kind of thing before. In the late 1990s, there was a boom in performance, growing at about 2.8% per year. Meanwhile, from 1995 to 2000, the index had five consecutive years of returns above 20%. This could happen again," JPMorgan experts emphasize (quoted by Business Insider).

The bank admits that the outlook for the markets has been somewhat clouded by inflation risks, the protracted conflict with Iran and the historic sell-off in U.S. Treasuries. However, analysts urge not to panic because of recent bond yield jumps.

"Risk assets don't always grow in a straight line. The current pullback in overheated AI infrastructure segments in response to rising bond yields is perfectly healthy. This is setting the stage for the next round of growth with more 'cleaner' investor positioning," JPMorgan summarized (quoted in Business Insider).

This article was AI-translated and verified by a human editor