Goldman Sachs: Earnings to Drive S&P 500 to New Highs This Year
Taylor Wilson
Goldman partner John Flood says the S&P 500 will hit a fresh record this year, backed by Q2 EPS growth of 45% — more than double consensus — but midterm-election-year history leaves the timing wide open.
How strong were Q2 earnings, really?
S&P 500 trailing Q2 EPS grew 45% year-over-year; Wall Street consensus at the start of the quarter was just 22%.
Strip out roughly $151 billion in equity-investment "other income" from Alphabet and Amazon plus about $3 billion from Microsoft, and growth still hit 26% — the fastest since 2021.
This means → it wasn't a mega-cap illusion. Median constituent EPS rose 12%, beating the 9% consensus. In plain terms = big and small names alike earned more — not just a handful of tech giants carrying the index.
Where are forward earnings estimates heading?
Since the start of Q3, the Street's consensus for S&P 500 2027 EPS has been revised up about 1%.
Energy and financials saw the largest upward revisions; breadth of positive revisions stayed wide across most sectors.
This means → analysts are chasing results higher, not trimming forecasts — a pattern that typically signals bull-market continuation.
How crowded is the market right now?
Goldman's sentiment-and-positioning indicator has dropped back to the 53rd percentile; most fast-money gauges have tilted bearish.
Hedge funds de-leveraged sharply — gross leverage gave back half of its year-to-date gains, net leverage fell below start-of-year levels, and retail leverage has eased from historic highs.
In plain terms = the market has wrung out a lot of speculative positioning; the setup is relatively "clean." This reflects that if earnings keep surprising, there is room for capital to reload.
When could the new high arrive — and what could delay it?
Flood flags one timing risk: across 13 midterm-election years since 1974, the S&P 500's median return from early August to Election Day is 0%.
This means → even with an earnings case supporting the bull thesis, midterm years historically produce a "going-nowhere" window from August through November.
In plain terms = earnings are the engine, but election-year policy uncertainty is the brake. A new high is likely — whether it lands before or after the vote is anyone's guess.
Content is for reference only, not financial advice.