Goldman: S&P 500 EPS Growth to Slow to 11% by 2027

Goldman Sachs Asset Management said on 2 November 2026 that it expects S&P 500 earnings per share growth to slow from 36% this year to 11% in both 2027 and 2028 as the lift from AI-related capital spending fades, and urged investors not to try to time the top of the US equity market. The bank's analysis of Bloomberg data as of 30 October found that roughly 40% to 60% of total returns in past bull markets arrived after earnings growth had already peaked.

Context — Why the Call Matters After the Tech Selloff

The note lands after a tech-led selloff that pushed investors to question whether to cut equity exposure. Goldman's answer is that slowing profit growth alone has rarely ended a bull market, a claim it supports with the historical record rather than with a view on valuations.

The bank's own figures show why timing is difficult. In the 1994 to 2000 cycle, the S&P 500 returned 112% before peak earnings growth and a further 166% after it. The 2009 to 2015 bull market delivered 155% before the peak and 105% after. The 2002 to 2007 run produced 75% and 46% respectively.

Those gains came despite earnings growth decelerating in each case. Goldman's argument is that the market prices the level and durability of profits, not the rate of change, so a slowdown from an exceptional pace does not by itself signal a top.

The exceptions matter more. The 2016 to 2018 bull market added just 8% after peak earnings growth as trade tensions escalated. The 2020 to 2022 cycle gained only 10% after its peak as aggressive interest rate hikes took hold.

Both episodes were ended by external shocks rather than by earnings deceleration. With the Federal Reserve on a hiking path, that is the scenario traders will watch most closely, because a more hawkish rate outlook would challenge the stay-invested case more directly than slower profit growth would.

Data — What the Numbers Show

Goldman's forecast puts S&P 500 EPS growth at 36% in 2026, then 11% in 2027 and 11% again in 2028. The deceleration is the headline figure, but the composition matters as much as the level: the drop reflects the fading boost from AI capital spending rather than a contraction in underlying demand.

The historical comparison is the core of the note. Goldman's post-peak returns range from 8% in the 2016 to 2018 cycle to 166% in the 1994 to 2000 cycle, a spread that shows how much depends on whether an outside force interrupts the expansion.

Bull market cycle	Return before EPS peak	Return after EPS peak
1994 to 2000	112%	166%
2009 to 2015	155%	105%
2002 to 2007	75%	46%
2016 to 2018	not disclosed	8%
2020 to 2022	not disclosed	10%

The pre-peak figures for the two shock-ended cycles were not given in the note. Goldman said the pattern holds across previous bull markets, with roughly 40% to 60% of total return arriving after peak earnings growth.

On individual names, the bank highlighted Meta's strong results, which it said were supported by record user engagement and rapid uptake of the company's new personal AI agent, Muse. Goldman said commerce is emerging as a key use case, opening potential revenue streams across transactions, subscriptions and business agents.

High inference costs have delayed a global rollout, though Meta expects efficiency gains as it optimizes its models and infrastructure. The bank did not disclose the timing or scale of that rollout.

Analysis — What It Means for Markets and Sectors

Goldman's sector preference is explicit. It favors large technology platforms with AI-driven measurable advertising, scale and pricing power, and tight cost control, and it sees pressure on traditional media agencies and smaller platforms.

The logic is that advertising budgets are shifting toward platforms that can prove results and automate campaigns with AI. That favors leading technology firms and disadvantages agencies whose value proposition rests on intermediation rather than measurement.

Scale and pricing power form the second driver. Goldman said market leaders have so far passed on higher costs without a significant hit to demand, which protects margins even as input costs rise. Cost discipline is the third, as media and consumer companies cut costs to fund AI investment while protecting margins.

The counter-argument is the one Goldman itself flags. The two shortest post-peak returns both followed external shocks, and the 2020 to 2022 cycle was ended by aggressive rate hikes. If the Fed tightens faster than expected, the historical base rate offers less protection than the headline figures suggest.

Positioning follows from that tension. Investors who accept the base rate stay invested and manage risk through diversification rather than by selling into strength, while those who weight the shock scenario more heavily would reduce exposure ahead of policy decisions. The flow question is whether the AI capital-spending cycle extends far enough to keep earnings growth above the 11% floor Goldman projects.

Outlook — What to Watch Next

The single most important variable is the Fed's rate path. Goldman identifies aggressive rate hikes as the force that cut the 2020 to 2022 cycle short, so any shift toward a more hawkish outlook would test the stay-invested case directly.

Second is the durability of AI capital spending. Goldman attributes the slowdown from 36% to 11% growth to that boost fading, so evidence that spending is extending would change the earnings trajectory the forecast rests on.

Third is Meta's rollout of the Muse agent. High inference costs have delayed a global rollout, and the bank said efficiency gains from model and infrastructure optimization would determine whether commerce use cases scale. No date for that rollout was disclosed.

The note did not name specific index levels, support or resistance. What it provides is a base rate: in most past cycles, the majority of gains came after the earnings peak, and the exceptions were policy-driven rather than profit-driven.

Frequently Asked Questions

What does Goldman's 11% EPS growth forecast mean for retail investors?

It means profit growth is expected to slow sharply from 36% in 2026, but Goldman argues that is not by itself a reason to sell. The bank's historical analysis found roughly 40% to 60% of bull market returns came after earnings growth peaked. The practical implication is diversification rather than exit, with the main risk being a policy shock rather than slower profits.

Why did Goldman highlight Meta specifically?

Goldman cited Meta's strong results, record user engagement and rapid adoption of its Muse AI agent, with commerce emerging as a key use case across transactions, subscriptions and business agents. The bank framed Meta as an example of the platform type it favors: one with AI-driven measurable advertising, scale and pricing power. High inference costs have delayed a global rollout, and Meta expects efficiency gains as it optimizes models and infrastructure.

What ended the bull markets where post-peak returns were smallest?

Goldman pointed to external shocks rather than earnings deceleration. The 2016 to 2018 cycle added just 8% after peak earnings growth as trade tensions escalated, and the 2020 to 2022 cycle gained only 10% after its peak as aggressive interest rate hikes took hold. Both were cut short by forces outside the earnings cycle, which is why the Fed's rate path is the key variable now.

Bottom Line

Goldman's base rate favors staying invested, but the Fed's rate path, not earnings growth, decides whether this cycle follows the long pattern or the short one.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.