Wall Street investment bank Goldman Sachs (GS) forecasts that the benchmark S&P 500 stock market index will rise 11% in 2026 as the artificial intelligence (A.I.) rally continues.
Strategists at Goldman Sachs see the S&P 500 hitting 7,600 by the end of 2026, an 11% gain from current levels.
Looking further out, Goldman Sachs offers a long-term forecast that sees the S&P 500 delivering a 6.5% annualized return over the next 10 years.
While the forecast is bullish, Goldman expects U.S. equities to underperform international stocks over the next decade, forecasting a 7.7% annualized return for global equities.
The team of analysts at Goldman say their 10-year S&P 500 forecast includes both bearish and bullish cases in a range of 3% to 10% growth.
The 6.5% annualized return is comprised of 6% earnings per share growth, a 1% annualized decline in valuations, and a 1.4% average dividend yield for companies in the S&P 500 index.
Goldman points out that the index’s net profit margin is near a record high of 13%, up from 5% in 1990, driven by falling interest rates and corporate taxes.
The strategists don’t expect those factors to boost profits as much moving forward.
In terms of risks, Goldman Sachs says markets are vulnerable to extreme concentration in the biggest U.S. companies, i.e. the mega-cap technology stocks that include Nvidia (NVDA) and Microsoft (MSFT).
“If the profitability and/or valuations of the largest companies falter, unless another cohort of ‘superstars’ emerges, returns for the broad market will likely be hampered,” writes Goldman.
A.I. presents the biggest upside to the investment bank’s profit forecast, either by driving strong economic and revenue growth or from companies using A.I. to boost their profit margins.
GS stock has risen 40% this year to trade at $810.31 U.S. per share.
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