Goldman Sachs strategists are claiming that concerns about an "earnings bubble" are overblown as the AI boom and a resilient economy will keep supporting companies.
Strategists led by Ben Snider said they expect growth to slow compared to the current year, but not to collapse. Concretely, they believe profit growth will clock in at 19% next year and 17% in 2028. The boost from AI investments, they claim, will start to fade as of next year even if capital spending continues to rise.
Snider also said stocks will keep rising next year, reaching 8,700 points in 2027, a more than 1,000 increase compared to Friday's figures.
Other strategists have also given their forecasts recently, with top Wall Street analyst Ed Yardeni trimming his own for the end of the year.
Concretely, Yardeni now expects the index to finish the year at 7,900, compared to 8,400 just last month. Back then he had upgraded it from 8,250 as corporate earnings kept soaring.
"Given the recent backup in bond yields, we are lowering our estimate for the forward P/E of the S&P 500 at year-end from 19.8 to 18.6, which lowers our year-end target from 8,400 to 7,900," he wrote in a note to clients that was reported by Bloomberg this week.
However, Yardeni said he expects for the economy to " grow without a recession through the end of the decade" and his target for then stands at 10,000.
Yardeni is not the only one being cautious about the S&P 500's path in the short term. This week, Bank of America's head of U.S. equity and quantitative strategy, Savita Subramanian, said the index could be due for a drop after an unusually long stretch without a significant stock market decline.
Subramanian said the S&P 500 has experienced only one pullback of at least 5% in 2026, compared with an average of roughly three such declines in a typical year.
The market has gone even longer without a full-fledged correction, generally defined as a drop of at least 10% from a recent 52-week high. According to Subramanian, the last correction occurred in the spring of 2025, when markets were shaken by tariff concerns.
"Pullbacks are normal," Subramanian wrote, according to CNBC. "In our view [we] are overdue for a pullback." The warning comes as several pressures are converging on U.S. stocks, including historically difficult seasonal trends, elevated Treasury yields, renewed inflation concerns and growing anxiety around the artificial intelligence trade that has helped propel parts of the market higher.
Elsewhere, the investment team behind one of the world's best-performing sovereign wealth funds is warning that the extraordinary returns delivered by U.S. stocks in recent years may not continue at the same pace, noting that markets could face a period of correction.
Jo Townsend, chief executive officer of the Guardians of New Zealand Superannuation, which manages New Zealand's $54 billion sovereign wealth fund, said Wednesday that U.S. equities have generated unusually strong gains compared with historical averages and could eventually experience a return toward more normal performance levels.
