Goldman expects earnings growth to slow sharply in 2027

what happened

Reuters reports that Goldman Sachs calls 2026 a strong year for earnings, yet is preparing investors for much weaker growth in 2027. In its latest research note, strategists led by chief global equity strategist Peter Oppenheimer point to a probable turning point in artificial intelligence spending and borrowing costs that remain high.

Projected profit growth for S&P 500 companies drops to 11% next year from an estimated 36% in 2026. For STOXX 600 firms the figure falls to 7% from 18%, and for the MSCI emerging markets index to 26% from 66%. Oppenheimer argues that the recent AI-driven selloff has already priced in weaker growth, while rotations have lifted defensive and value stocks. He expects shares to keep rising, but with high volatility.

The strategists favor a mix of defensive names and long-duration growth companies that gain from lower bond yields, including US hyperscalers. They are overweight the US and Japan, neutral on Asia and emerging markets, and underweight Europe. They warn that risks are becoming more two-sided, since bond yields, oil and shifts in AI capital spending could all lift volatility.

why it matters

For markets, the direction of profit expectations matters as much as their level. When forecasts cool, valuations and sector leadership start to depend more on interest rates and oil prices.

market impact

US, European and EM stocks: slower profit outlook and sector rotation raise volatility.

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