Goldman Sees Cyclical Peak in Earnings Growth, Not Bubble

Goldman Sachs strategist Ben Snider is pushing back on the idea that today's sky-high corporate profits are a 'bubble' about to pop. Yes, earnings are growing much faster than normal, up 51% year over year in Q2 and 26% over the past year, and valuations (CAPE ratio) are near dot-com-era highs.

Yet, the bank sees the surge as an orderly cyclical peak rather than an impending crash. 'Our base case is for S&P 500 earnings growth to decelerate, not collapse, in coming years,' Snider wrote in a client note.

Goldman set a 12-month S&P 500 target of 8,700, implying a 14% return, and expects EPS to climb 11% in both 2027 and 2028, to $415 and $460, respectively. That is more cautious than consensus, which Bloomberg Intelligence data show calling for 19% and 17% growth.

The firm expects the over-earning phase to subside, as baseline demand replaces initial buildout tailwinds. Snider noted that market pricing embeds an outlook for continued earnings growth but healthy skepticism regarding the sustainability of current profitability.