Earnings growth is set to peter out — but not the bull market, says Goldman Sachs. Here’s what the firm recommends.
Earnings growth is almost halving across major indices in 2027 but stocks have already discounted much of that deceleration. Goldman recommends investors focus closely on those companies still delivering strong growth – as strong growth becomes a scarce commodity.
Goldman Sachs' forecast that earnings growth will slow significantly in 2027, nearly halving across major indices, may seem like a harbinger of market woes. However, the firm's strategists believe that the bull market will persist, as the deceleration in earnings growth has already been priced into stocks. This nuanced view suggests that investors should not necessarily brace for a market downturn but rather adjust their stock picking strategies.
The key implication of Goldman's analysis is that investors will need to be more discerning in their stock selection, focusing on companies that can still deliver robust growth. As growth becomes a scarce commodity, these companies are likely to be more valuable. This advice aligns with a broader trend in the investment community, where there is an increasing emphasis on quality and growth investing, particularly in a potentially slowing earnings environment.
To watch next: investors will be keenly monitoring corporate earnings reports and guidance for 2027 to identify companies that can sustain strong growth. Additionally, market participants will be scrutinizing economic indicators for signs of a slowdown and how central banks might respond, which could influence the trajectory of interest rates and, in turn, impact stock valuations and investor appetite for growth stocks.
Originally reported by marketwatch.com. FundNews adds analysis for finance & markets readers.