Goldman Sachs: Expects the S&P 500 to rise 14% to 8,700 points over the next year, recommends overweighting US and Japanese equities.

November 13, according to Bloomberg, Goldman Sachs strategists expect the S&P 500 index to rise about 14% to 8,700 points over the next 12 months. The team led by Peter Oppenheimer recommends overweighting US and Japanese equities and underweighting European equities in 2027. The S&P 500 has risen 11% year to date.

A key reason for Goldman Sachs' bullish stance on US equities is that after the selloff in large-cap tech stocks, the valuations of hyperscale cloud service providers have fallen significantly below historical levels. The Nasdaq 100 index has pulled back about 9% from its early October high, with market concerns about AI infrastructure investment and the management turmoil at Nvidia both weighing on tech stocks. Goldman Sachs believes the tech sector, especially large cloud service providers, remains relatively defensive: although the cash flow of leading companies has turned negative, balance sheet metrics such as the ratio of net debt to shareholders' equity remain healthy overall.

Goldman Sachs expects EPS growth for S&P 500 constituents to slow from 36% in 2026 to 11% in 2027, while the corresponding growth rate for the STOXX Europe 600 index will drop from 18% to 7%. The bank believes that as earnings growth slows, companies able to sustain faster growth over the long term are expected to command higher valuation premiums. The team is also bullish on sectors that typically benefit from falling bond yields, easing inflation and lower oil prices.

In Europe, although the STOXX Europe 600 index hit a new high this week driven by earnings performance and capital outflows from the AI sector, Goldman Sachs still recommends an underweight position. The bank believes that European equity valuations have pulled back less than other regions, and government debt issues and a dense political calendar also pose additional risks.