Goldman Sachs Raises Its S&P 500 Forecasts. These Three Investment Moves Are Crucial, According to Strategists

After the White House once again delayed the implementation of tariffs, investors are left trying to make sense of what it means for the markets. But not everyone is buying into the upbeat reaction.

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Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, warned that markets may be getting ahead of themselves, labeling the current optimism as “suspicious.” She believes investors are overlooking the negative implications tariffs can have on global supply chains, corporate profits, economic growth, and inflation. “Expecting everything to magically resolve in three weeks is like believing in unicorns,” she wrote.

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Still, others are more hopeful. Goldman Sachs delivered a more upbeat outlook for the market in its latest forecast. Led by David Kostin, the firm’s chief U.S. equity strategist, the team raised their 12-month S&P 500 target from 6,500 to 6,900—an 11% projected gain from current levels. Over the next three months, they anticipate a 3% increase to 6,400, and a 6% climb over six months to 6,600.

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Goldman’s view is built on several assumptions: resilient earnings growth through 2026, the Federal Reserve resuming rate cuts, and investor positioning that’s still relatively neutral. These factors, they say, support more gains as the current rally—concentrated in just a few stocks—starts to broaden.

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Their outlook also includes a forecast for earlier and more aggressive rate cuts from the Fed than previously expected, and lower bond yields. Meanwhile, the fundamentals of major companies remain solid, and investors seem willing to look past any short-term weakness in earnings. As a result, Goldman has lifted its S&P 500 forward price-to-earnings ratio forecast from 20.4 to 22 times.

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Goldman predicts earnings per share for the S&P 500 will grow by 7% in both 2025 and 2026. However, they acknowledge there’s still a lot of uncertainty—especially around tariffs. These trade-related issues could push profits lower, particularly in 2026, when their projections fall slightly below the broader consensus. They caution that how tariffs evolve will play a key role in shaping actual earnings.

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Nevertheless, Goldman expects the impact of tariffs to unfold gradually. They argue that many large companies have built up inventory to offset some of the pressure from future tariff increases. While risks remain, the firm believes that historical patterns support more upside for stocks, especially following the beginning of a new Fed rate-cutting cycle.

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That said, Goldman also pointed out that only a limited number of S&P 500 stocks have driven the market higher so far. The average stock in the index is still more than 10% below its 52-week high. This reflects extremely narrow market breadth—a condition where only a small number of stocks are rising. Historically, this can precede bigger market declines. Yet Goldman remains confident that a “catch-up” scenario, where more stocks join the rally, is more likely than a “catch-down.”

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They also note that current investor positioning remains well below earlier 2025 levels, and the market appears to be pricing in a more optimistic economic growth outlook.

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As the second half of the year gets underway, Goldman recommends a few strategic investment approaches. First, they advise maintaining a balanced portfolio that includes companies with strong individual growth stories—such as those in software, media, and entertainment—as well as sectors like materials, utilities, and real estate, which offer defensive or cyclical advantages.

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Second, they suggest looking at alternative asset managers. Despite an improved environment for capital markets, these firms have underperformed relative to expectations based on broader macro trends.

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Finally, Goldman recommends identifying companies with significant floating rate debt. As bond yields decline with rate cuts, these firms may see positive revisions to their earnings forecasts.

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Goldman expects that as concerns over tariffs ease, investors will turn their attention to lagging stocks—those that haven’t yet participated in the broader rally. They’ve even compiled a list of Russell 3000 names that fit this profile, combining high short interest, sensitivity to bond yields, and low valuations. Topping that list are Kohl’s, Intellia Therapeutics, Gogo, Plug Power, and Apellis Pharmaceuticals.

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Meanwhile, U.S. stock futures are mostly flat to slightly higher. Tech futures are outperforming, while Treasury yields are inching upward. The dollar, on the other hand, is moving slightly lower.

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In other developments, Exxon Mobil said its second-quarter earnings could be hit by more than $1 billion due to lower oil prices, with nearly another billion affected by weaker natural gas prices. Waymo, owned by Alphabet, has started testing its autonomous vehicles in New York and is planning expansion to Philadelphia.

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Meta has reportedly poached a top AI executive from Apple, offering a contract worth tens of millions of dollars. Kevin Warsh, a former Federal Reserve governor and possible successor to Jerome Powell, is proposing a plan to cut interest rates.

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Looking ahead, investors await the New York Fed’s latest inflation expectations report and consumer credit data later in the day. The Treasury is also set to auction $58 billion in 3-year notes.

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