Sep. 18 at 7:30 PM
Goldman Sachs pushes back against market fears of an impending "earnings bubble" burst.
While acknowledging that corporate earnings are currently running well above long-term trends and that some firms are "over-earning," Goldman projects a gradual deceleration in EPS growth rather than a profit collapse
S&P 500 EPS grew +51% in 2Q26 & +26% over the past 4 quarters, lifting profits well above their long-term trend.
Goldman added that while the index's fwd P/E multiple of 19x is in line with its 10-yr avg, its multiple on trend earnings has been exceeded in recent decades only at the peak of the dot-com bubble.
Goldman f/casting EPS growth of +11% in both 2027 & 2028, to
$415 &
$460, respectively.
The biggest long-term question is AI - the investment boom has driven nearly half of this year's earnings growth, a tailwind that should fade in 2028 as capital spending slows & depreciation mounts, turning into a marginal drag.
Goldman also flagged risks from a potential fall in semiconductor prices, where an adverse scenario could cut S&P 500 earnings by about -10% if margins fall back to 55% (the 15-yr avg) from current margin of 70%. Additionally, non-operating gains from tech equity investments boosted 2Q26 earnings by +12% - tese gains are unsustainable & expected to fade starting in 2027
“Our 12-month S&P 500 return forecast of +14% (to 8,700) reflects the view that earnings growth, rather than expanding valuations, will remain the primary driver of the bull market,” concluded Goldman
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