Goldman Sachs Expects S&P 500 to Rise 14% to 8700 Over Next Year
Goldman Sachs strategists expect the S&P 500 index to climb 14% over the next year to 8700 points, driven by a drop in cloud computing valuations following recent tech sell-offs.
The S&P 500 has accumulated an 11% gain this year, according to finance.eastmoney.com. Peter Oppenheimer and his team at Goldman Sachs released a client report detailing their positive outlook for U.S. and Japanese equities by next year.
This optimistic forecast arrives as the Nasdaq 100 index sits 9% below its early October peak.
Over the past month, Meta shares dropped roughly 18% and Alphabet fell close to 16%. Oracle lost over 11% while Microsoft declined nearly 4%. Amazon moved in the opposite direction, posting gains exceeding 3% over the same period.
Goldman Sachs strategists said that the recent market pullback pushed the valuations of hyperscale cloud providers significantly below historical levels. Their report notes that despite negative free cash flows, the overall balance sheets of these major firms remain solid in terms of net debt-to-equity ratios.
“We think that technology, and particularly hyperscalers, have relatively high defensive characteristics,” the Goldman Sachs team wrote.
The firm projects that S&P 500 earnings per share growth will slow sharply from 36% in 2026 to 11% in 2027. European Stoxx 600 index earnings growth is expected to drop from 18% to 7% over the same timeframe.
Strategists advise investors to favor U.S. and Japanese stocks while targeting industries that benefit from declining bond yields, falling inflation, and lower oil prices. Conversely, the firm maintains an underweight stance on European equities due to limited valuation drawdowns, government debt concerns, and heavy political calendars.
“As growth becomes scarcer, we expect investors to pay a higher premium for companies that can continue to deliver growth,” the strategists wrote in the report.