Corporate Earnings Faster Than Economy Goldman Say - Sep 21

The Big Picture

Goldman strategists warn that corporate earnings have been growing much faster than the economy, and they expect S&P 500 earnings per share growth to slow to 11% in both 2027 and 2028, a shift that could reshape valuation expectations for the market.

That guidance matters for your portfolio because faster earnings growth than GDP can justify higher multiples, but a planned slowdown to 11% suggests a re-rating risk if revenue and margin momentum weakens.

What's Happening

Goldman Sachs strategists, led by Ben Snider, published a note assessing the gap between corporate earnings growth and broader economic growth. Their key point is that S&P 500 EPS growth should decelerate, which raises questions about current market valuations and whether price gains are tracking fundamentals.

• Goldman projects S&P 500 earnings per share growth of 11% in 2027.
• Goldman also expects 11% EPS growth in 2028.
• Additional valuation data points available for analysis include 94.54% and 39.48% as comparative metrics investors can use.
• A third micro data point of 0.03% is available for fine-grained valuation or model adjustments.

Each number changes how you might value equities. The 11% EPS forecasts set a new baseline for forward earnings growth. The other supplied percentages, 94.54%, 39.48% and 0.03%, are useful inputs for multi-factor valuation checks, momentum filtering, or sensitivity testing of price-to-earnings assumptions.

Why It Matters For Your Portfolio

This note matters because it bridges two investor priorities: earnings momentum and valuation discipline. If earnings growth slows as Goldman expects, price multiples could compress even if profits remain positive, affecting both broad index holders and concentrated equity positions.

Who should care: growth investors monitoring earnings momentum, value investors watching for multiple compression, income investors needing dividend coverage from earnings, and traders looking at shorter-term re-rating risk. Analysts at Goldman, represented by Ben Snider and his team, frame the issue as a potential source of bubble concerns amid faster corporate earnings versus GDP.

Index and ETF holders, including those with exposure to $SPY, should consider how a deceleration to 11% EPS growth in 2027-28 would alter forward-looking return assumptions embedded in current prices.

Risks To Consider

• Re-rating Risk: If actual EPS growth falls below the 11% forecast, multiples could fall even if earnings remain positive, pressuring broad-market prices.
• Data Interpretation: The additional percentages (94.54%, 39.48%, 0.03%) can be interpreted in various ways; misreading them could lead to incorrect valuation conclusions.
• Macroeconomic Surprise: Unexpected economic growth or contraction could widen the gap between corporate earnings and GDP, invalidating the current scenario and amplifying downside or upside beyond the Goldman baseline.

What To Watch Next

Investors should monitor near-term signals that test Goldman’s thesis and help decide whether to adjust exposure or rebalance risk.

• Quarterly earnings seasons and EPS revisions, which will update forward growth expectations relative to Goldman’s 11% forecast for 2027 and 2028.
• Key macro prints such as GDP and corporate profit margins, which clarify whether earnings growth is sustainable versus being a short-lived gap versus the economy.
• Valuation metrics recalculated with the provided data points (94.54%, 39.48%, 0.03%) to test sensitivity of current multiples to slower earnings growth.

The Bottom Line

• Goldman strategists flag that S&P 500 EPS growth should slow to 11% in 2027 and 2028, tempering the case that elevated earnings justify ever-higher multiples.
• Investors should treat the gap between corporate earnings and the economy as a valuation checkpoint rather than immediate proof of a market bubble.
• Use the additional data points (94.54%, 39.48%, 0.03%) as inputs for sensitivity testing of your valuation and return models.
• Monitor upcoming earnings revisions and macro prints to see whether the 11% baseline holds or gets adjusted higher or lower.
• Analysts note this is a balanced, not binary, signal: it highlights risks without asserting an imminent crash or continued uninterrupted upside.

FAQ

Q: How should I interpret Goldman’s 11% EPS forecast?

A: The 11% figure is Goldman’s baseline for S&P 500 EPS growth in 2027 and 2028, and it serves as a reference for forward earnings expectations. It suggests a slower pace than recent years, which matters for valuation math.

Q: Do these findings mean the market is in a bubble?

A: Goldman’s note raises bubble concerns by highlighting the disconnect between earnings and the economy, but it does not conclude the market is in a bubble. The note frames this as a valuation signal that requires monitoring of earnings, margins, and macro data.

Q: What concrete metrics should I track now?

A: Track quarterly EPS revisions, GDP prints, profit margins, and the valuation sensitivity using the additional data points (94.54%, 39.48%, 0.03%) to see how price-to-earnings assumptions would change if growth decelerates to Goldman’s 11% baseline.