Goldman Sachs Sees S&P 500 Rising to 8,700 Next Year Despite Slower Earnings Growth

Goldman Sachs expects the S&P 500 to climb to 8,700 points over the next year, maintaining an optimistic outlook for US equities despite forecasts of slower corporate earnings growth. The projection suggests that the investment bank sees further potential in the stock market, even as technology shares face pressure and investors prepare for greater volatility.

The outlook comes amid uncertainty surrounding the US economy and the impact of the country’s midterm elections on financial markets. While Goldman Sachs anticipates a notable slowdown in global earnings growth by 2027, particularly in the United States, it believes equity valuations could continue to support attractive returns.

The bank is also adjusting its regional market assessments as it prepares for a potentially more volatile investment environment. Its outlook highlights the possibility that opportunities could extend beyond the US market as global earnings and valuations evolve.

Key Highlights

• Goldman Sachs expects the S&P 500 to reach 8,700 points over the next year.
• The bank anticipates slower global earnings growth by 2027, particularly in the United States.
• Pressure on technology shares following the US midterm elections adds uncertainty to the market outlook.
• Goldman remains optimistic that equity valuations can support attractive investment returns.
• The investment bank is revising regional market ratings while preparing for increased volatility.

Goldman Sachs Sees More Than 14% Upside for S&P 500

Goldman Sachs’ target of 8,700 points represents an upside of more than 14% from the S&P 500’s latest closing level of 7,592.40 points. The forecast reflects the bank’s belief that the recent technology-stock selloff has improved market valuations and created opportunities for further gains.

The investment bank expects equities to benefit from continued economic expansion, slower but positive earnings growth and potentially lower bond yields and inflation. These factors could help support share prices even if corporate profit growth loses momentum.

Goldman believes the recent decline in stock valuations has made the market more attractive than it was during the earlier rally. The S&P 500 was trading at approximately 18.5 times its 12-month forward earnings, compared with recent highs of more than 23 times.

This adjustment in valuations is central to the bank’s optimistic outlook. Rather than relying on another sharp expansion in stock multiples, Goldman expects earnings growth and relatively supportive economic conditions to contribute to further market gains.

Global Earnings Growth Could Slow Sharply in 2027

Despite its positive stock market forecast, Goldman Sachs expects corporate earnings growth to decelerate significantly across global markets in 2027. The bank anticipates that earnings growth rates could fall by at least half in several major markets.

The slowdown is expected to be particularly noticeable in the United States. Goldman projects US earnings growth to decline from approximately 36% to 11%, partly because spending by large technology companies on data centres and AI infrastructure could lose momentum.

Large cloud computing companies, commonly known as hyperscalers, have invested heavily in artificial intelligence infrastructure. Their spending has supported demand for advanced semiconductors, servers, networking equipment and data-centre facilities.

If these companies moderate their capital expenditure, businesses supplying the AI infrastructure ecosystem could face slower revenue and earnings growth. This may create challenges for semiconductor manufacturers, equipment providers and other companies that have benefited from the rapid expansion of AI-related investment.

However, Goldman does not expect slower earnings growth to automatically translate into falling equity prices. It believes more attractive valuations and continued economic expansion could help markets deliver positive returns despite the expected slowdown.

Technology Selloff Raises Questions About AI Investment

The recent decline in major technology shares has added uncertainty to the broader market outlook. Concerns about the pace of data-centre construction and the sustainability of massive AI investments have encouraged investors to reassess valuations across the technology sector.

The pressure has also affected sentiment towards companies closely connected to the AI infrastructure boom. Investors are increasingly examining whether the revenue generated by AI services will justify the substantial investments being made in computing capacity.

Nvidia has become a particular focus of market attention following leadership developments and controversy surrounding the company. The chipmaker’s difficulties have added to concerns about the AI trade and contributed to uncertainty across technology stocks.

For investors, the key question is whether the recent selloff represents a temporary correction or the beginning of a broader reassessment of AI-related growth expectations. Goldman Sachs’ outlook suggests that lower valuations could create opportunities, although the sector may experience further volatility.

Goldman Sachs Maintains Overweight Rating on US and Japan

Goldman Sachs has also adjusted its regional equity outlook as it evaluates investment opportunities across global markets. The bank maintains an overweight rating on US and Japanese equities, indicating a preference for these markets relative to its broader allocation benchmark.

Its assessment of other regions is more cautious. Goldman has maintained a neutral rating on Asia and emerging markets, while assigning an underweight rating to European equities.

These ratings reflect the bank’s assessment of expected returns, earnings prospects and investment risks across different markets. The preference for the US and Japan indicates that Goldman continues to see relatively attractive opportunities in these regions despite concerns about slower global earnings growth.

The regional differences also highlight why investors may need to look beyond headline market performance. Economic conditions, corporate profitability, valuations and currency movements can create different investment opportunities across countries.

Higher Market Volatility Expected Despite Positive Returns

Goldman Sachs expects global equities to generate positive returns over the coming year, but it has warned that volatility could be higher than in recent years. This suggests that the path towards its S&P 500 target may involve significant market fluctuations.

Several factors could contribute to this uncertainty, including changes in AI-related spending, corporate earnings trends, bond yields and inflation. Developments in energy prices and broader economic conditions could also influence investor sentiment.

For investors, higher volatility means that markets may experience sharper short-term gains and losses even if the longer-term direction remains positive. Companies with sustainable earnings growth and stronger business fundamentals could attract greater attention as investors become more selective.

The outlook also suggests that investors should avoid relying entirely on the recent performance of high-growth technology stocks. As earnings growth slows, businesses capable of maintaining stable profits may become increasingly important to portfolio strategies.

What Goldman Sachs’ Forecast Means for Investors

Goldman Sachs’ S&P 500 forecast presents a relatively optimistic view of the US Stock Market despite growing concerns about corporate earnings and AI investment. The bank believes the improvement in valuations following the technology selloff could provide support for equities.

However, the expected slowdown in US earnings growth from 36% to 11% indicates that the market may enter a different phase. Companies may find it more difficult to deliver the exceptional profit growth that supported recent stock market gains.

Investors will therefore be watching corporate earnings, technology spending and economic indicators closely. The ability of businesses to maintain profitability while managing costs could become a more important factor in determining share price performance.

Goldman’s forecast is an investment outlook rather than a guaranteed market outcome. Changes in economic conditions, interest rates, inflation and corporate spending could cause actual market performance to differ significantly from the projection.

Conclusion

Goldman Sachs expects the S&P 500 to reach 8,700 points over the next 12 months, implying more than 14% upside from its latest reported closing level. The bank believes improved valuations and continued economic growth could support equities even as global earnings growth slows in 2027.

However, the expected decline in US earnings growth from 36% to 11%, alongside uncertainty surrounding AI infrastructure spending, could create challenges for technology companies. With Goldman favouring US and Japanese equities while warning of higher volatility, investors may need to focus more closely on valuations, earnings quality and sustainable business growth.