Goldman Sachs Forecasts 11% Stock Market Gain Despite Trade Risks

Even as the White House once again delays tariff decisions, Goldman Sachs remains confident in the market’s upside potential. In their latest outlook, strategists led by David Kostin now project the S&P 500 will rise 11% over the next 12 months, targeting 6,900—up from a previous estimate of 6,500.

They expect steady gains along the way, forecasting a 3% climb to 6,400 in the next three months and a 6% rise to 6,600 within six months.

The team’s optimism is driven by several key factors: stronger-than-expected earnings growth in 2026, the anticipated return of Fed rate cuts, and neutral investor positioning, which they believe provides room for the rally to broaden beyond just a handful of large-cap names.

Not all analysts share the upbeat view.

Ipek Ozkardeskaya of Swissquote Bank warns that markets are acting “suspiciously optimistic,” turning a blind eye to the potential economic damage from tariffs. “Assuming everything will be magically resolved in the next three weeks is like seeing unicorns in the sky,” she wrote.

Still, Goldman sees signs of resilience. They now forecast a forward P/E ratio of 22, up from 20.4, as investors seem willing to overlook short-term earnings softness. EPS growth is projected at 7% for both 2025 and 2026, though the team admits tariffs could pose downside risks to these estimates.

Goldman expects the impact of tariffs to play out slowly, noting that many large-cap companies have stockpiled inventory, providing a buffer.

However, one major concern remains: market breadth. The median S&P 500 stock is still more than 10% off its 52-week high, pointing to a narrow rally. Yet, the strategists believe this could turn into a “catch-up” rally, where more stocks join the climb rather than pull back.

Goldman’s 3 Investment Themes for H2:

1. Diversify across sectors: Focus on growth industries like software, media, and entertainment; add exposure to materials as a cyclical laggard, and defensives like utilities and real estate.
2. Tap into alternative asset managers: These firms have lagged despite a stronger capital markets backdrop.
3. Target companies with high floating-rate debt, which stand to benefit from falling bond yields.

As tariff fears begin to fade, Goldman expects investors to rotate into overlooked names. Among their top Russell 3000 picks with high short interest, low valuations, and strong upside potential are:
Kohl’s (KSS), Intellia Therapeutics (NTLA), Gogo (GOGO), Plug Power (PLUG), and Apellis Pharmaceuticals (APLS).