The year-end spurt on the stock market has begun. Recently the mood has been rather cautious. Nevertheless, Goldman Sachs sees further upside potential for the S&P 500 in 2026.
• S&P 500 earnings forecast raised to around $308 per share in 2026
• Goldman Sachs valuation model implies a price target of approximately 6,800 to 7,000 points
• Other analysts also see some significant upside potential
Weaker Labor market brings interest rate cuts into focus
The US economy is increasingly slowing down. U.S. labor market data from August showed the unemployment rate rose to 4.3 percent, while there were more layoffs and fewer job vacancies. This development will influence the course of the US Federal Reserve, Goldman Sachs predicts in an official statement. The bank expects a total of three interest rate cuts by the end of 2025, two of which have already been implemented. Two more will be added over the course of 2026.
Rate cuts have historically been seen as a tailwind for the stock market because they lower borrowing costs and make investments easier. According to Reuters, the S&P 500, on average, rises more strongly during periods of interest rate cuts, while decreasing price momentum is observed during periods of rising interest rates.
Increased profit forecasts and a price target of around 7,000 points
In addition to monetary policy, the profit development of companies is crucial for stock market valuation. A Goldman Sachs Weekly Kickstart analysis reported by MarketWatch shows that the S&P 500’s 2026 earnings estimate was last raised to about $308 per share. The expectation is therefore higher than previously assumed.
In an analysis at the beginning of September, which TheStreet reported on, Goldman Sachs itself had given a price target for the S&P 500 of around 6,600 points by the end of 2025 and around 6,900 points by mid-2026. The updated earnings estimate of around $308 per share at the beginning of 2026 and a valuation level close to 22 times earnings confirm this magnitude mathematically. In relation to the current index valuation of 6,720.38 units, there is moderate but still positive price potential (as of November 6, 2025).
Jefferies is more optimistic
While Goldman Sachs expects a rather cautious increase, Jefferies is much more confident. According to an analysis by Investing.com, the company expects the index to reach around 7,500 points by the end of 2026. This is justified by continued robust profit growth and increasing profitability in industries with a strong connection to artificial intelligence.
Jefferies points to the continued high return on capital of many large US technology stocks as well as expected efficiency gains from AI-related investments. While Goldman Sachs insists more on valuation discipline and macroeconomic risks, Jefferies is betting that growth stocks will achieve above-average returns in a market environment that continues to rise.
How things could continue in the new year
Basically, the outlook for the year-end rally and the coming year remains positive, but differentiated. Goldman Sachs sees the effect of lower interest rates and rising corporate profits as key factors, but expects the price increase to be rather limited. Jefferies, on the other hand, expects new momentum from structural trends such as artificial intelligence.
What this means for investors is that it is not just short-term economic development that will be crucial, but above all the question of how sustainably companies can confirm their growth and earnings targets in the coming year.
Editorial team finanzen.net
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