Goldman Sachs Forecasts S&P 500 to Hit 7,200 as Market Rally Widens

Goldman Sachs Forecasts S&P 500 to Hit 7,200 as Market Rally Widens

2025-12-24 economy

New York, Tuesday, 23 December 2025.
Goldman Sachs anticipates the S&P 500 hitting 7,200 in 2026, fueled by $100 billion in tax refunds and sturdy growth, despite the risk of volatility from high valuations.

A “Tech Tonic” for a Broadening Market

As of late December 2025, Goldman Sachs Research has unveiled a strikingly optimistic yet nuanced forecast for the coming year, projecting the S&P 500 will climb to 7,200 by the end of 2026 [1]. This target underscores a continuation of the current bull market, which analysts have dubbed a “Tech Tonic,” suggesting a healing or strengthening phase where market breadth expands beyond the dominant technology giants [2]. While the firm anticipates lower index returns compared to the robust performance seen in 2025, the outlook remains constructive, predicated on earnings growth rather than multiple expansion [2]. This shift marks a critical evolution in the market’s trajectory, moving from a narrow rally to a broader participation across various sectors.

Macroeconomic Resilience vs. Consensus

Underpinning this equity optimism is a macroeconomic forecast that diverges significantly from the broader market consensus. Goldman Sachs economists project real GDP growth in the United States to hit 2.6% in 2026, substantially outperforming the consensus forecast of 2.0% [3][4]. On a global scale, the firm expects sturdy growth of 2.8%, edging out the general expectation of 2.5% [4]. This anticipated economic acceleration is attributed to a combination of specific fiscal and financial tailwinds, including reduced tariff drag, tax cuts, and easier financial conditions [3]. Specifically, the firm’s analysis points to an expected $100 billion in additional tax refunds, which is projected to directly stimulate consumer spending in the coming year [1].

Policy Shifts and Sector Opportunities

Monetary policy is expected to play a pivotal role in sustaining this growth, with the Federal Reserve projected to guide interest rates toward a terminal range of 3.0% to 3.25% in 2026 [1]. Chief Economist Jan Hatzius has characterized the economic impact as a “front-loaded” boost likely to materialize in the first half of the year [1]. This environment of non-recessionary rate cuts coupled with sturdy growth creates a fertile ground for corporate profitability [5]. Consequently, Goldman Sachs forecasts a 12% growth in earnings per share (EPS) for the S&P 500 [1]. In a clear sign of the “broadening” market theme, cyclical sectors such as Industrials and Real Estate are projected to see their EPS growth jump to 15%, offering distinct opportunities for investors willing to diversify beyond mega-cap technology [1].

Despite the constructive outlook on growth and earnings, the path to 7,200 is not expected to be linear. In a report titled “Some Like It Hot,” Goldman Sachs warns that tensions arising from “hot valuations” may introduce significant volatility throughout 2026 [5]. While the economic backdrop is supportive, these elevated valuation metrics leave little room for error, suggesting that markets may be susceptible to sharp fluctuations even amidst a general upward trend [5]. The firm advises a strategic pivot for 2026, recommending that investors move away from cash and strictly mega-cap tech holdings in favor of a diversified, cyclical-heavy portfolio to navigate the friction between high prices and earnings-driven growth [1].

Sources


Market Outlook Equity Strategy