Goldman Sachs strategists have highlighted in a recent report that upward revisions to corporate earnings expectations are concentrated in a limited number of sectors, a structural trend that has propelled the S&P 500 to record highs. The team, led by strategist Ben Snider, noted that although consensus earnings per share (EPS) estimates for S&P 500 constituents in 2025 and 2026 have risen by 4% since January, nearly all of this increase stems from the energy and information technology sectors. Rising energy prices, influenced by tensions in the Middle East, and renewed optimism surrounding investments in artificial intelligence (AI) have been the primary drivers of gains in technology stocks.
According to the team, since the onset of the Iran conflict, just two companies—Micron Technology (MU.US) and Exxon Mobil (XOM.US)—have collectively contributed over 60% of the upward revisions to the S&P 500's 2026 EPS consensus. Meanwhile, half of the index's components have seen no adjustments to their 2026 earnings expectations in recent months. Snider stated, "The recent upward revisions in S&P 500 earnings expectations have been overwhelmingly driven by a small number of individual stocks."
Last Friday, the benchmark U.S. stock index closed at an all-time high, posting its strongest weekly performance of 2026. However, Goldman Sachs strategists argue that this rally, much like the earnings revisions, lacks broad-based support. The team's market breadth indicators have fallen to near multi-decade lows, exceeding only the levels seen during the dot-com bubble and mid-2023.
Goldman Sachs believes the key test for the current market will be whether the core phase of the first-quarter earnings season can lead to a broader dispersion of earnings upgrades and market gains. Developments related to navigation through the Strait of Hormuz are particularly critical for cyclical sectors tied to the economic cycle.
Compiled data shows that the U.S. large-cap earnings season has begun on a strong note, with approximately 81% of companies reporting EPS above market expectations so far. Last week’s earnings releases were dominated by financial institutions, with JPMorgan Chase (JPM.US), Bank of America (BAC.US), Citigroup (C.US), and Goldman Sachs (GS.US) all reporting record revenues from their equities trading businesses.
Goldman Sachs projects that S&P 500 EPS will grow by 12% this year, a figure broadly in line with Wall Street strategists' top-down forecasts but below the 18% growth expected by bottom-up consensus. The strategists indicated that risks are two-sided but skewed to the upside. Downside pressures primarily stem from weaker consumer demand and rising input costs due to geopolitical conflicts, while upside potential is linked to AI investment and improvements in productivity.
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