US stocks are expected to hit fresh record highs in the months ahead, according to Goldman Sachs Research, powered by ongoing growth in corporate earnings.

What is the outlook for the S&P 500 in 2026? 

The S&P 500 is forecast to climb 6% to a year-end target of 7,600 (as of April 24), Ben Snider, chief US equity strategist in Goldman Sachs Research, writes in the team’s report. That forecast is built on expectations of 12% earnings-per-share growth in 2026 and a 10% increase in 2027. The index is trading at a price-to-earnings (P/E) multiple of roughly 21 times—slightly below the 22 times reached in January 2026 and close to its five-year average.

Valuations are high compared to their long-run history: The P/E ratio is higher now than it’s been about 87% of the time over the past 40 years. But Snider says that’s reasonable, or close to fair value, because companies are making near-record profits and interest rates are relatively low. Looking ahead, earnings growth is expected to drive US stocks higher.

Why did US stocks rally amid the conflict in Iran? 

The S&P 500 has surged about 13% since March 30, marking its sharpest rally since April 2020 and, before that, March 2009, Goldman Sachs Research notes. The pattern is consistent with historical recoveries: Stock markets are forward-looking and tend to bounce back on hints of improvement, before conditions fully stabilize.

“In the near term, equity market gyrations will likely continue to mirror geopolitical volatility,” Snider writes.

Investor sentiment has followed a similar pattern. Goldman Sachs Research's US Sentiment Indicator bottomed at negative 0.9 in late March and has since recovered to positive 0.8, roughly where it stood in mid-January, the team writes. Notably, that level remains well below the peaks seen during previous overheated rallies.

Retail traders have also re-entered the market with enthusiasm, a trend Snider expects to get a boost from the elimination of the Pattern Day Trader rule, which has relaxed minimum equity requirements in some margin accounts (which let traders borrow money from their brokers).

Is AI investment driving stocks higher? 

Consensus earnings estimates have risen consistently in recent weeks, reflecting both the limited oil price sensitivity of the S&P 500 and the extraordinary earnings tailwind from spending on artificial intelligence (AI). 

Snider estimates that AI-related investment will drive approximately 40% of S&P 500 earnings-per-share (EPS) growth this year. Just a small number of large technology companies have been responsible for the majority of recent upward revisions to index-level EPS estimates, Goldman Sachs Research finds.

The scale of spending has increased considerably. Last quarter, consensus capital expenditure estimates for the largest cloud infrastructure companies jumped by $130 billion, reaching $670 billion for 2026. That’s equivalent to more than 90% of their expected cash flows this year, according to our strategists. Fueled by that spending, a Goldman Sachs Research basket of stocks tied to AI data center construction has returned nearly 60% so far this year.

However, the AI boom cuts both ways. While it’s a boost for earnings, the uncertainty it creates has compressed valuations across much of the market. That’s the case not just for industries facing disruption, but even for the mega-cap technology firms at the center of the buildout, Snider notes. Until these large companies can demonstrate accelerating revenues alongside slowing capital spending, the clearest investment opportunity remains in the companies supplying the AI infrastructure itself, he writes.

What are the biggest risks to US stocks? 

Despite the bullish headline numbers, there are also reasons to be cautious, Snider writes. Market breadth—the share of stocks participating in the rally—has dropped to one of its narrowest levels since the dotcom era, according to Goldman Sachs Research. The war in Iran and the AI build out are the “clearest equity market risks in coming weeks,” Snider writes.

In the meantime, corporate confidence appears solid. “Recent surveys have been mixed but show little panic, and corporate actions are even more encouraging than their words,” Snider writes.

Year-to-date share buyback authorizations have hit a record $422 billion, and announced strategic merger-and-acquisition volumes have more than doubled compared to a year ago.

Which US stocks are the best opportunity for investors? 

Snider suggests that investors should focus on companies that benefit from longer-term structural trends (secular growth companies) and from unique earnings advantages (particularly those tied to power infrastructure investment).

He points out that growth stocks, or companies that are expected to increase their earnings quickly over time, used to be more expensive compared to slower-growing value stocks. But recently, that valuation difference has shrunk. That means growth stocks aren't as overpriced relative to value stocks as they were before.

This article is being provided for educational purposes only. The information contained in this article does not constitute a recommendation from any Goldman Sachs entity to the recipient, and Goldman Sachs is not providing any financial, economic, legal, investment, accounting, or tax advice through this article or to its recipient. Neither Goldman Sachs nor any of its affiliates makes any representation or warranty, express or implied, as to the accuracy or completeness of the statements or any information contained in this article and any liability therefore (including in respect of direct, indirect, or consequential loss or damage) is expressly disclaimed.