Goldman Sachs raises S&P 500 target but warns that the Iran war could push up energy prices and weigh on global growth
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Goldman Sachs raises S&P 500 target but warns that the Iran war could push up energy prices and weigh on global growth
Following strong Q1 results, the report raises S&P 500 earnings and target levels, while also forecasting slower global growth in 2026, energy shocks lifting inflation, and changes to the Fed and ECB policy paths.
- 2026/2027 S&P 500 EPS forecasts were raised to $340/$385, and the end-2026 S&P 500 target was increased to 8000.
- Goldman Sachs expects global real GDP growth to slow to 2.4% yoy in 2026, with global core inflation edging down to 2.7% by end-2026.
- US real GDP is expected to grow 2.1% on a Q4/Q4 basis in 2026, with core PCE falling to 2.8% by December 2026 and the unemployment rate at 4.6% by year-end.
- The Fed is expected to cut rates by 25bp each in December 2026 and March 2027, with a terminal rate range of 3%-3.25%, though there is a possibility of remaining on hold for an extended period.
- Euro Area real GDP is expected to grow only 0.5% in 2026, and the ECB is expected to raise rates by 25bp each in June and September 2026 to a 2.5% peak before cutting to 2% in 2027.
- China’s real GDP is expected to grow 4.7% yoy in 2026, with CPI/PPI inflation projected to rise to 1.0%/2.0%.
Report interpretation
Overview
This Goldman Sachs macro outlook report updates forecasts for growth, inflation, and monetary policy across the global economy, the United States, the Euro Area, and China, and treats the energy price increase caused by the Iran war as the main macro shock. The report also raises 2026/2027 S&P 500 EPS forecasts and the end-2026 index target due to strong Q1 corporate earnings.
Core views
The core view is that improved equity earnings prospects support a higher S&P 500 target, but the global macro environment has become more complex. Energy supply disruptions and rising oil prices will weigh on global growth and increase inflation persistence; the US still has room to cut rates, but that is not certain; the Euro Area may first hike and then cut rates due to energy shocks and inflation pressure; China’s growth is constrained by weak domestic demand and real estate, but export resilience and policy easing provide a buffer.
Analysis framework
The report uses a top-down regional macro forecasting framework centered on GDP, core inflation, employment, policy rates, and market target levels. Key scenario variables include the Iran war and oil flows through the Strait of Hormuz, energy prices, fading tariff effects, normalization of wage and housing inflation, AI-related price pressures, and market pricing.
Methodology notes
Breaking down growth, inflation, and policy paths across the global economy, the US, the Euro Area, and China.
The report presents real GDP, core inflation, and central bank policy expectations for 2026-2028 by region, using the energy price shock as a common exogenous variable.
An indicator measuring current growth.
The original text states that GS CAI is a measure of current growth, with methodology referenced from Goldman Sachs Global Economics Comment dated September 1, 2025.
The market pricing date used as the forecasting reference point.
Market pricing in the report is as of May 26, 2026, so subsequent changes in rates, oil prices, or equity indexes may alter the implications of the forecasts.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- S&P 500/US EquitiesHigher earnings forecasts and index target
- Strengths
- An exceptionally strong Q1 earnings season drove 2026/2027 EPS forecasts up to $340/$385.
- Weaknesses
- Rising oil prices, AI-related price pressures, and potentially higher rates may weigh on valuations.
- Comparison
- The end-2026 target was raised from 7600 to 8000.
- Risks
- If inflation reaccelerates or the Fed stays on hold for an extended period, achieving the equity target becomes more difficult.
- Global Macro/Multi-AssetIran war and energy price shock
- Strengths
- Some regions still benefit from policy easing, export resilience, or business investment support.
- Weaknesses
- Global real GDP is expected to slow to 2.4% in 2026, with higher energy prices weighing on growth and lifting inflation.
- Comparison
- Global core inflation is expected to edge down only modestly to 2.7% by end-2026.
- Risks
- Persistently low oil flows through the Strait of Hormuz would amplify economic and market risks.
- US RatesFed rate-cut path
- Strengths
- Fading tariff effects and cooling wage and housing inflation support rate cuts after end-2026.
- Weaknesses
- Oil prices and AI-related price pressures could offset the disinflation trend.
- Comparison
- The base case is two 25bp cuts to 3%-3.25%, but there is also a possibility of rates remaining unchanged indefinitely.
- Risks
- If core PCE cools less than expected, rate cuts will be delayed and risk assets will come under pressure.
- Euro Area Rates/European AssetsECB policy path of hiking first, then cutting
- Strengths
- Core inflation is expected to peak in 2Q27 and then gradually decline to 2.0% by end-2028.
- Weaknesses
- Real GDP is expected to grow only 0.5% in 2026, with high energy prices suppressing consumption and investment.
- Comparison
- The ECB is expected to hike twice in 2026 to a 2.5% peak, then cut back to 2% in 2027.
- Risks
- A prolonged energy shock would intensify stagflation pressure and weigh on European risk assets.
- China Macro/China AssetsGrowth, inflation, and policy easing
- Strengths
- Export resilience, government policy easing, and reduced real estate drag support growth.
- Weaknesses
- Weak domestic demand and higher energy prices limit growth momentum.
- Comparison
- 2026 real GDP is expected at 4.7%, with CPI/PPI at 1.0%/2.0%.
- Risks
- If domestic demand recovery is insufficient or global commodity prices continue to rise, growth and profit margins may come under pressure.
Key data
- S&P 500 EPS Forecast (2026/2027)$340/$385Previously $309/$342; the upward revision was driven by an exceptionally strong Q1 earnings season.
- S&P 500 End-2026 Target8000Previously 7600.
- Global Real GDP Growth (2026)2.4% yoyMainly dragged down by higher energy prices caused by the Iran war.
- Global Core Inflation (end-2026)2.7%Fading tariff effects and normalization in housing and wage inflation create downside pressure, but higher energy prices offset part of that decline.
- US Real GDP Growth (2026 Q4/Q4)2.1%Consumer spending growth slows, but business investment growth remains fairly resilient.
- US Core PCE (December 2026)2.8% yoyCooling tariffs, wage, and housing inflation are partly offset by oil prices and AI-related price pressures.
- US Unemployment Rate (end-2026)4.6%Reflects cooling labor market conditions amid slower growth.
- Fed Policy Path25bp cuts in December 2026 and March 2027, terminal range 3%-3.25%The report also notes a reasonable possibility that the Fed could keep rates unchanged indefinitely.
- Euro Area Real GDP Growth (2026 Q4/Q4)0.5%High energy prices suppress consumption and investment.
- Euro Area Core Inflation Peak2.7% yoy (2Q27)Then expected to gradually decline to 2.0% by end-2028.
- ECB Policy Path25bp hikes in June and September 2026, peak at 2.5%; falls back to 2% in 2027Reflects inflation pressure under the energy price shock.
- China Real GDP Growth (2026)4.7% yoyWeak domestic demand and higher energy prices are a drag, while export resilience, policy easing, and reduced real estate drag provide support.
- China CPI/PPI Inflation (2026)1.0%/2.0% yoyMainly driven by rising global commodity prices.
Impact & implications
For portfolios, the report signals coexistence between upward earnings revisions for equities and macro tail risks. The higher S&P 500 target supports risk appetite for US equities, but if the energy shock persists, it will pressure valuations through inflation, real income, corporate costs, and central bank policy paths. Divergence in Fed and ECB policy directions also means that yield curves, US dollar liquidity, and regional asset performance may become more dependent on inflation data and oil price trends.
Risks
- The Iran war ceasefire remains fragile, and oil flows through the Strait of Hormuz are still low; the longer the disruption lasts, the greater the economic and market risk.
- Rising energy prices may simultaneously reduce real growth and increase inflation, creating stagflation-like pressure.
- There is a possibility that the Fed keeps rates unchanged for a prolonged period, which could limit room for equity valuation expansion.
- Euro Area growth is weak and inflation is being disturbed by energy prices, making the ECB policy path highly uncertain.
- Weak domestic demand and the drag from the real estate market in China have not been fully eliminated.
What to watch
- The status of the Iran war ceasefire, oil flows through the Strait of Hormuz, and global oil prices.
- Whether further S&P 500 earnings revisions can sustain the strong Q1 performance.
- US core PCE, wage inflation, housing inflation, and the unemployment rate.
- Whether the Fed cuts rates as expected in December 2026 and March 2027.
- The ECB’s pace of rate hikes in June and September 2026 and whether Euro Area core inflation peaks in 2Q27.
- China’s 2Q26 quarter-on-quarter growth, domestic demand recovery, export resilience, and the degree of policy easing.