Goldman Sachs strongly rejected concerns regarding an S&P 500 earnings bubble on Tuesday, forecasting another quarter of double-digit growth to begin next week.
In a separate show of confidence, Deutsche Bank reaffirmed its year-end target of 8,000 points for the benchmark index.
Goldman Sachs Dismisses S&P 500 Bubble Talk, Reaffirms Bullish Outlook
An earnings bubble describes a situation where corporate profit growth becomes unsustainable, eventually triggering a sharp correction as reality catches up to inflated expectations.
Ben Snider, chief U.S. equity strategist at Goldman, contended that this description fails to characterize the current market. During an appearance on Bloomberg Open Interest, Snider explained that a bubble implies earnings are primed to plummet—an outcome Goldman does not anticipate.
At present, aggregate S&P 500 earnings are advancing by more than 30% year over year, while the median stock continues to deliver a healthy 14% gain.
While Snider conceded that some deceleration is probable as fiscal tailwinds subside and energy expenses increase, he still anticipates sturdy results. Furthermore, current tracking for third-quarter GDP indicates growth above 3%.
Addressing artificial intelligence specifically, Snider stated that compute demand and token consumption are projected to keep climbing through 2027, thereby sustaining one of the market’s primary earnings drivers.
He also pointed out that investor positioning currently sits at its lowest point since March, reflecting a widespread cautiousness that could propel additional gains should positive catalysts like declining oil rates or interest rate cuts take shape.
Why Is Deutsche Bank Just as Bullish Right Now?
Led by Binky Chadha, Deutsche Bank’s equity strategy team released a report titled “To 8,000 and Beyond?” that highlighted multiple factors underpinning their optimistic perspective.
The bank anticipates that third-quarter earnings will generate roughly 30% year-over-year growth, matching an equally robust second quarter. Additionally, Deutsche Bank upgraded its 2027 earnings-per-share projection to $420, signaling growth of nearly 17%.
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Historical trends provide further backing. Chadha’s group noted that 21 out of the previous 23 mid-term election years yielded positive fourth-quarter returns, averaging a 7% increase. The bank observed that positioning, technical indicators, and supply-demand forces all maintain a favorable tilt.
Ultimately, both institutions arrive at a similar conclusion: while the extraordinary earnings growth experienced throughout 2026 will likely moderate somewhat, neither firm anticipates anything akin to a market collapse.
As long as corporations maintain double-digit or high-teens profit expansions, bolstered by ongoing AI investments and a durable broader economy, Wall Street’s two most prominent bulls see substantial room for the S&P 500 to advance toward year-end and beyond.