Goldman Sachs' latest assessment: with the support of a "profit windfall," the S&P 500 is expected to rise to 7,600 points within the year!

Why does Goldman Sachs see the technology sector as the main driver of profit growth?

Cailian Press, March 16 (Editor: Huang Junzhi) Goldman Sachs strategists recently stated that the U.S. stock market still has room to rise, and they expect the S&P 500 to reach 7,600 points by the end of 2026. This implies about a 15% potential increase, supported by corporate earnings expansion and continued moderate economic growth.

According to Goldman Sachs’ latest report, their forecast is based on in-depth analysis of the earnings outlook for the S&P 500 companies. The firm expects the earnings per share (EPS) of S&P 500 constituents to grow to approximately $309 in 2026, and further to about $342 in 2027, representing annual growth rates of roughly 12% and 10%, respectively.

This forecast indicates that even with high interest rates and a slightly tightening financial environment, the market remains confident that corporate profitability will continue to expand.

Technology remains the “main force”

Goldman Sachs points out that technology companies are still the primary drivers of profit growth among U.S. listed companies.

Specifically, the firm estimates that the information technology sector will contribute the most to the profit performance of the S&P 500 in the coming years. EPS in this sector is expected to jump from about $70 in 2025 to $92 in 2026, and further to $109 in 2027.

Goldman also anticipates that other significant contributing sectors will include financials, healthcare, and communication services, although their growth rates are expected to be more moderate.

Valuations are high but not “extreme”

Despite the strong stock market rally in recent years, Goldman Sachs believes valuations remain within historical ranges. The firm’s analysts explain that the current P/E ratio of the S&P 500 is about 21 times, close to its long-term average relative to its historical distribution.

The report also notes that some sectors appear to have higher valuations than others. Industrial, utility, and consumer staples sectors are near the upper end of their historical valuation ranges, while the financial sector’s valuation multiples are relatively lower compared to historical levels.

Goldman Sachs points out that this divergence suggests investors may increasingly rotate between sectors as growth expectations change.

“Concentration” issue

The report also highlights the increasing “concentration” trend in the U.S. stock market. According to Goldman Sachs estimates, the top ten companies account for about 39% of the S&P 500’s market capitalization and roughly 31% of its earnings.

The firm states that this concentration reflects the dominance of a few tech-driven companies benefiting from structural trends such as artificial intelligence, cloud computing, and digital infrastructure.

Meanwhile, strategists also note that market breadth remains relatively narrow, meaning fewer stocks are driving the overall index performance.

Energy sector leads

Since the beginning of this year, energy-related investments have performed the best among various asset classes. Crude oil prices have surged by about 70%, and energy stocks have risen nearly 30%. This increase far outpaces broader stock market benchmarks and significantly leads other major asset categories.

At the same time, gold and consumer staples sectors have also shown strong upward momentum, becoming market highlights. In contrast, growth stocks like technology and non-essential consumer goods have underperformed on a risk-adjusted basis.

Economic growth expected to remain stable

Goldman Sachs economists forecast that the U.S. economy will continue to expand at a moderate pace over the next few years.

Specifically, they estimate that real GDP growth will be about 2.3% in 2026 and slow to around 2.0% in 2027, a trajectory generally aligned with market expectations. Additionally, Goldman Sachs expects the 10-year U.S. Treasury yield to gently decline to about 4.1% within the next year.

Overall, Goldman Sachs concludes that this combination of economic and financial conditions has the potential to support continued stock market gains.

(Cailian Press, Huang Junzhi)