Goldman Sachs Cautions on Market Concentration Risks

Goldman Sachs Sees S&P 500 at 7,600 by 2026, But Warns of Tech Fatigue

Goldman Sachs strategists are sounding a cautious note on Wall Street’s biggest winners, warning that the “superstar” tech stocks driving recent gains may eventually lose momentum.

In one of the first forecasts for next year, Goldman projects the S&P 500 to reach 7,600 by the end of 2026, an 11% rise from current levels.

Looking further out, the bank expects the index to deliver a 6.5% annualized return over the next decade — slightly below its 7.7% forecast for global equities and near the 27th percentile of historical returns since 1990.

Their 10-year outlook includes a range of 3% to 10% annualized returns. The base case reflects 6% earnings-per-share growth, offset by a 1% drop in valuations and a 1.4% dividend yield, with revenue growth expected to track nominal GDP. A softer U.S. dollar could also provide a modest lift.

Goldman notes that corporate profit margins remain near record highs at 13%, up from 5% in 1990, thanks to globalization, lower interest rates, and reduced corporate taxes — tailwinds that may not repeat in the next decade. The bank’s valuation forecast assumes a 4.5% nominal Treasury yield by 2035 and a forward P/E of 21, down roughly 10% from current levels.

Still, the strategists see a major wild card in market concentration. The dominance of a few mega-cap tech firms has powered the market higher, but if their profitability or valuations falter — and no new leaders emerge — broader returns could suffer.

On the upside, AI could prove to be a powerful growth engine, potentially lifting earnings-per-share growth to 9%, well above Goldman’s base forecast.