Goldman Sachs Sees Earnings Slowdown, But Not the End of the Bull Market

Earnings growth is set to slow sharply in 2027. Goldman Sachs projects that profit expansion across the major stock indices will almost halve, which on its face looks like a warning for the rally. The bank's read is more measured. In its view, investors have already priced in much of the deceleration, so slower profit growth does not automatically mean the bull market is running out of steam.

The distinction matters because share prices move on expectations as much as on reported results. When analysts have already marked down future earnings, a slowdown that arrives roughly as expected tends to do less damage than a surprise. Goldman's argument is that the index-level picture of fading growth hides wide gaps between individual companies. Some businesses will keep expanding their profits while others lose momentum, and the market's current valuations leave less room for error for the weaker names.

That points to the firm's practical advice. Investors should concentrate on companies that are still delivering strong growth, because such companies are becoming scarce. When overall earnings growth cools, a business that can keep lifting its profits stands out, and the market often pays a premium for it. Spreading money evenly across an index could leave an investor holding a large share of firms whose growth is fading.

The outlook is a forecast, not a guarantee. It depends on economic conditions and corporate spending, both of which can shift faster than analysts expect. Investors weighing the advice should also check how much growth a stock's price already assumes, since a high valuation can cancel out the benefit of strong earnings.