Goldman Sachs 2026 US Equity Outlook: Great Potential
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Goldman Sachs forecasts another year of solid gains for US equities in 2026, targeting a 12% total return for the S&P 500 with a year-end target of 7,600. Earnings growth remains the primary driver, with EPS expected to grow 12% in 2026 and 10% in 2027, fueled by healthy economic expansion and AI-driven productivity gains.
Although valuations appear stretched at 22 times forward earnings, matching the 2021 peak, the supportive macroeconomic backdrop of economic growth and Federal Reserve easing should sustain multiples. However, market concentration is at record highs, with the ten largest stocks accounting for 41% of market capitalization and driving 53% of 2025 returns.
The AI investment cycle is transitioning from infrastructure to application and automation phases, which should broaden sector participation. Goldman Sachs highlights five key investment themes: mid-cycle acceleration, re-leveraging, AI implementation, the return of corporate artistry via IPOs and M&A, and seeking value in wide valuation spreads. While current valuation, concentration, and return dynamics echo historical market peaks, speculative activity, leverage, and fund flows remain below extreme thresholds, offering opportunities for active stock pickers.