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Goldman Sachs forecasts positive outlook for U.S. stocks through 2026

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  Published in Stocks and Investing on Monday, September 8th 2025 at 16:29 GMT by Seeking Alpha
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Goldman Sachs Projects a Bullish Run for U.S. Stocks Through 2026

By a Research Journalist – 2025-09-08

Goldman Sachs, one of the world’s largest investment banks, has just released a fresh equity outlook that paints an optimistic picture for the U.S. stock market over the next three years. The research note, published on Seeking Alpha (https://seekingalpha.com/news/4493119-goldman-sachs-forecasts-positive-outlook-for-u-s-stocks-through-2026), lifts its target for the S&P 500 to 5,350 by the end of 2026, an upside of roughly 18 % from today’s level. The note also projects a 20 % rally for the Nasdaq Composite, with a 2026 target of 13,800. In this article, we distill the key take‑aways, the underlying assumptions, and the risks that Goldman flags.

1. The Macro Framework

Goldman’s analysis is built on a multi‑layered macro model that blends current data with expectations for fiscal policy, monetary conditions, and corporate earnings. A few core drivers stand out:

1. Inflation and Interest Rates
   - Price Stability: The bank assumes inflation will remain “anchored” at 2 % after a recent peak of 5.5 % in early 2023. It relies on the Fed’s forward‑guidance that the 5‑year yield will stay around 1.6 % by 2025, a level that historically supports equity valuations.
   - Fed Outlook: Goldman projects the Federal Reserve will hold the policy rate at 5.25 % through the end of 2024 before easing by 25 bp in Q2 2025. The research notes that easing will spur risk‑on sentiment, particularly in growth stocks.

2. Fiscal Policy & Supply‑Side Growth
   - Infrastructure Investment: The bank incorporates the new Infrastructure Investment and Jobs Act, estimating an incremental 2 % rise in U.S. GDP from 2025 onward.
   - Corporate Tax Reform: It assumes a modest 1 % lift in corporate profit margins driven by lower effective tax rates and improved business sentiment.

3. Corporate Earnings Momentum
   - Earnings Growth: Goldman projects earnings per share (EPS) growth of 9–10 % in 2024, tapering to 7 % in 2025 and 6 % in 2026. The expectation is built on strong demand in tech, consumer discretionary, and industrials.
   - Valuation Multiples: The bank expects the S&P 500 P/E to climb from 22 today to 26 by 2026, reflecting a return to pre‑pandemic valuation norms.

2. Sector‑Specific Highlights

Goldman’s note dives into the composition of the market, suggesting that certain sectors will outperform:

Key Takeaway: Technology and consumer discretionary are expected to lead the rally, driven by ongoing digital transformation and a rebound in consumer confidence. Industrials benefit from infrastructure spending, while energy is poised for a modest upside as commodity prices stabilize.

3. Risk Factors

While the forecast is bullish, Goldman stresses that a number of risks could derail the expected rally:

1. Surge in Interest Rates – A “Fed‑shock” hike could compress equity valuations.
2. Supply‑Chain Disruptions – Ongoing disruptions in semiconductors and logistics could stifle earnings growth.
3. Geopolitical Tensions – Escalation in U.S.–China trade tensions or a new Middle‑East conflict could trigger risk‑off sentiment.
4. Fiscal Over‑reach – Overly aggressive spending or debt levels could undermine the economic expansion premise.
5. Pandemic Aftershocks – A resurgence of COVID‑19 or a new variant could again curtail consumer activity.

Goldman flags each risk with a probability and potential upside/downside, encouraging investors to monitor key indicators such as the 5‑year Treasury yield, corporate debt ratios, and geopolitical news streams.

4. How the Forecast Was Formed

Goldman’s note cites its “equity‑valuation framework” that uses a “risk‑premium” approach. The bank applies an expected risk‑premium of 2.5 % to the risk‑free rate and an additional 3 % to capture equity‑specific risk. The resulting discount factor is then applied to projected free‑cash‑flow data derived from the S&P 500 constituents.

The research also references the firm’s “Macro‑Equity Overlay” model, which integrates sentiment indicators such as the “U.S. Consumer Confidence Index” and the “Corporate Sentiment Index” from the Institute for Corporate Forecasting. In addition, Goldman cross‑checked its macro assumptions against the Federal Reserve’s “Federal Economic Projection Summary” and the World Bank’s “Global Economic Prospects”.

5. Practical Implications for Investors

For portfolio managers and individual investors alike, the Goldman Sachs outlook suggests a few actionable points:

1. Increase Exposure to Growth Sectors – The forecast indicates that tech, consumer discretionary, and industrials are likely to drive the market’s gains.
2. Consider Tactical Shift Toward U.S. Equities – The forecast expects U.S. equities to outperform both global peers and the U.S. Treasury market, as the yield curve is projected to normalize.
3. Maintain a Risk‑Balanced Approach – The noted risks underscore the need to keep a diversified mix, perhaps incorporating a small allocation to high‑quality bonds or inflation‑protected securities as a hedge.
4. Stay Updated on Fed Communications – The Fed’s policy statements are a key trigger; an early rate hike could wipe out the expected upside.
5. Watch Corporate Earnings Releases – Earnings surprises will shape market sentiment; a weaker-than‑expected EPS growth in 2024 could delay the bullish trajectory.

6. Conclusion

Goldman Sachs’ latest research paints a hopeful, albeit contingent, picture for U.S. equities through 2026. With a projected 18 % rally for the S&P 500 and a 20 % gain for the Nasdaq, the outlook hinges on a combination of steady inflation, accommodative monetary policy, and solid corporate earnings. Investors who believe the macro backdrop will hold are likely to see gains in growth‑heavy portfolios. Conversely, those concerned about the highlighted risks may prefer a more cautious stance, perhaps keeping a balanced mix of equities and fixed‑income instruments.

As always, the best strategy is to monitor the key data points highlighted by Goldman—Fed policy, inflation, earnings growth—and to adjust exposures accordingly. The market’s future trajectory will ultimately be decided by how quickly—and how dramatically—these variables evolve in the coming years.