1 day ago
Goldman Sees S&P 500 Reaching 8,700 on Earnings Growth
Goldman Sachs thinks the S&P 500, a group of large US companies, could rise to 8,700 within a year.
The firm expects companies to make more money, rather than investors simply paying higher prices for their shares.
Company earnings have grown much faster than usual recently.
Spending on artificial intelligence has helped some companies earn more.
Goldman expects that spending boost to weaken, while AI may later help companies work more efficiently.
The firm sees earnings growing about 11% a year in 2027 and 2028.
There are risks, including high valuations by one measure and uncertainty about AI's effects.
Goldman says its forecast is not based on assuming that share valuations will rise sharply.
Goldman Sachs Research forecasts the S&P 500 at 8,700 in 12 months, about 13.5% above its October 2 close.
The forecast relies on earnings growth rather than a higher valuation, with the forward P/E assumed near 19.
S&P 500 earnings per share rose 51% year over year in the second quarter and 26% over the past four quarters.
Goldman expects EPS to grow about 11% in 2027 and 2028, reaching $415 and $460, respectively.
AI investment is expected to support earnings initially, but its spending boost may fade as productivity gains become more important.
- Who
- Goldman Sachs Research, including chief US equity strategist Ben Snider.
- What
- Forecasts the S&P 500 will reach 8,700 in 12 months, supported mainly by earnings growth.
- Where
- The United States stock market, represented by the S&P 500.
- When
- The 12-month forecast was reported after a report first released September 21; the article cites the October 2 close.
- Why
- Goldman expects continued earnings growth, supported by solid GDP growth and, over time, productivity gains from AI.
Reasons for confidence
Risks and cautions
Earnings outlook
Reasons for confidence
Goldman expects earnings to keep growing about 11% annually in 2027 and 2028, rather than collapse.
Risks and cautions
Recent growth is unusually strong, and Goldman expects the rate to decelerate as temporary boosts fade.
Market valuation
Reasons for confidence
Goldman says the forward P/E of 19 is in line with its 10-year average and sees no near-term valuation bubble signal.
Risks and cautions
The Shiller PE is above 40, a rare level, and Goldman acknowledges that even an average multiple could be expensive if earnings are unsustainable.
Artificial intelligence
Reasons for confidence
AI investment has contributed substantially to earnings growth, and later productivity gains could support profits.
Risks and cautions
The boost from AI spending is expected to fade, depreciation costs will rise, and the scale of AI's long-term profit impact remains uncertain.
Key facts
- S&P 500 target
- 8,700 over 12 months
- Implied upside
- About 13.5% from the October 2 close
- October 2 close
- 7,666.45
- Forward P/E
- About 19 times, matching its 10-year average
- Recent EPS growth
- 51% year over year in the second quarter; 26% over the past four quarters
- Goldman EPS forecast
- $415 in 2027 and $460 in 2028, with about 11% annual growth forecast
- Shiller PE
- Above 40, a level the article says has previously occurred only at the dot-com bubble peak and now
- AI spending
- Almost half of 2026 S&P 500 EPS growth is attributed to AI investment; hyperscalers are on track to spend $800 billion on capex this year
Quotes
Ben Snider
Chief US equity strategist at Goldman Sachs Research.
“Energy prices and interest rates create near-term macro risks around these forecasts, but the impact of AI is the biggest long-term question for corporate earnings.”
financialexpress.com
“Our base case is for S&P 500 earnings growth to decelerate, not collapse, in coming years.”
financialexpress.com
Sources
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