Goldman sees S&P 500 at 8,700 in 12 months, tilts toward U.S. and Japan

The call and the setup

Goldman Sachs' strategists are upbeat on U.S. stocks heading into 2027, telling clients they see the S&P 500 climbing 14% to 8,700 within 12 months even as profit growth slows. The index has already risen 11% so far in 2026.

Their case leans on a reset in big tech valuations. After worries about the AI buildout and a scandal at Nvidia that led to CEO Jensen Huang losing his job this week, the Nasdaq 100 is down 9% from its early October peak, leaving the major cloud and AI platforms trading well below their historical ranges.

Tech as defense, balance sheets still solid

Goldman says Technology - particularly the hyperscalers - looks relatively defensive here, noting the largest firms have recently turned cash flow negative but still carry healthy balance sheet metrics such as net debt to equity. In parallel, Bloomberg data show the Nasdaq 100's valuation at a six year low and well under its 10 year average after a 25% de rating this year.

As growth becomes scarce, they expect investors to pay up for companies that can keep expanding. "We expect investors to seek companies that can sustain growth as it becomes more scarce," they wrote, adding that "attractive opportunities are emerging in long-duration growth companies, which should become more valuable as growth rates slow."

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Positioning: U.S. and Japan over Europe

Oppenheimer's team is overweight the U.S. and Japan next year and underweight Europe, arguing European valuations have not fallen as far as elsewhere. They also flagged higher regional risks tied to government debt "issues" and "a heavy political calendar."

Even so, the Stoxx Europe 600 reached a fresh record this week, helped by a stronger earnings season and money moving out of the AI trade.

Earnings glide path and why it matters

Goldman expects global profit growth to cool in 2027 and recommends sectors that typically benefit when bond yields fall, inflation eases and oil prices decline. Their projections put S&P 500 EPS growth at 11% next year, down from 36% in 2026, while for the Stoxx Europe 600 they see 7% versus 18%.

The bottom line: if earnings decelerate as projected, the market may reward durable growers and markets with cheaper, improving set ups - which, in Goldman's view, points to the U.S. and Japan.

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