Slower profit growth could become the main risk for US stocks in 2027

what happened

According to Capital Economics, S&P 500 companies are on track for earnings growth above 30% this year, slowing to 16.3% in 2027. That is still roughly double the long-term average, but doubts that even this pace will materialize have weighed on indexes including the tech-heavy Nasdaq Composite, which finished Friday close to correction territory.

The forward price-to-earnings ratio for the S&P 500 has fallen all year, to around 19, about 20% below its peak. Tech multiples have dropped faster: Nvidia trades in the mid-teens, roughly half its 2025 highs. Analysts disagree on whether a bubble is forming in share prices or in projected earnings.

John Higgins of Capital Economics says earnings could partly reverse in 2027, and stocks would be vulnerable because of heavy weighting in megacap AI-linked companies, uncertain overseas monetization and a share of profits already near a record.

why it matters

Profit growth is highly concentrated: according to Dow Jones Market Data, five companies are expected to drive 68% of next year's earnings growth, four of them chipmakers. That leaves the index sensitive to AI infrastructure spending expectations and the cost of capital.

market impact

US stocks: slower earnings and lower multiples pressure indexes

• ▼S&P 500 pressure down — slower earnings growth in 2027 could weaken support for valuations
• ▼Nasdaq Composite pressure down — tech multiples are falling faster and depend on AI spending

instruments