Banking giant Goldman Sachs predicts that the S&P 500 can soar 6.4% by the end of 2026, mostly driven by earnings growth from one tech sector.
The News
In a new investor note, Goldman Sachs says it sees the S&P 500 surging to 8,000 by year-end, fueled by earnings growth, reports Reuters.
“Earnings growth has powered the entire S&P 500 return so far this year, and we expect this dynamic to continue in the coming months.”
The bank says the beneficiaries of the massive AI CapEx cycle this year will drive half of the S&P 500’s earnings growth in 2026, highlighting that it sees AI investments offsetting weak consumer spending along with the rising prices of goods and services.
“In addition, while S&P 500 earnings estimates have risen more quickly than index price appreciation, the semiconductor stocks at the heart of the AI infrastructure complex have recently outpaced their forward earnings.”
What It Means for Investors
It appears that Goldman Sachs is joining a group of banks that have revealed their bullish stance on the US stock market. Earlier this month, JPMorgan Chase said market fundamentals remain strong, while noting that earnings multiples for many stocks are still in the single digits, even though the S&P 500 is trading at all-time highs.
And last week, Morgan Stanley CIO Mike Wilson said the bank is targeting 8,300 over the next 12 months for the index, fueled by higher earnings growth estimates.
What’s unique about Goldman’s call is its focus on the AI beneficiaries. In Q1, institutional investment firms like Ray Dalio’s Bridgewater Associates and Paul Tudor Jones’ Tudor Investment have poured money into AI beneficiaries, such as the high-flying memory name Micron Technologies (MU) and the semiconductor firm Broadcom (AVGO).
As an investor, it is always best to question the timing of the banks’ announcements. While the timing is not necessarily a bearish signal, it might pay dividends to wonder why the big banks are suddenly bullish on the market after a Q1 that saw big funds accumulate names in the AI beneficiaries basket, while the S&P 500 was in the midst of a correction.
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