# Goldman Sachs Sees Equity Gains Ahead but Warns Investors Against Chasing Market Leaders

- URL: https://stocks.freetheai.org/news/goldman-sachs-sees-equity-gains-ahead-but-warns-investors-against-chasing-market-234755
- Published: 2026-10-18T15:29:09Z
- Category: markets; sentiment: mixed; impact: medium
- Symbols: [SP:SPX](https://stocks.freetheai.org/symbols/SP-SPX)
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Strategists at Goldman Sachs expect U.S. stocks to keep advancing as corporate earnings grow, but they caution investors against buying into top-performing momentum stocks. A recent report highlights that market leadership has become unusually concentrated. While the S&P 500 (SP500) traded close to its all-time high, the average stock in the index remained significantly lower, marking one of the narrowest market breadth environments in decades.

This extreme gap creates risk for momentum strategies that concentrate on recent market winners. Goldman Sachs noted that its momentum measure dropped 8% in a single week, showing how fast crowded trades can reverse. Furthermore, profit growth faces headwinds from elevated interest rates, higher oil prices, and decelerating growth in artificial intelligence capital investments, which currently drive about half of the index's total profit gains.

Looking ahead, strategists see potential in lagging consumer-oriented shares. Expected declines in inflation, interest rates, and energy costs in 2027 could boost lower-income household purchasing power and jumpstart underperforming consumer sector equities. In the near term, investors should focus on durable companies with resilient earnings, stable valuations, and low share price volatility rather than relying on expanding market multiples.

## Key points

- Goldman Sachs expects S&P 500 earnings per share of $375 in 2026 and $415 in 2027, driven by corporate profit growth.
- Market participation is near its narrowest level since the dot-com bubble, with the median S&P 500 stock 15% below its peak.
- AI capital expenditure currently accounts for approximately half of S&P 500 earnings growth, but spending growth is expected to moderate.
- Strategists favor lagging consumer discretionary shares, projecting real income growth for lower-income households to accelerate in 2027.

## Questions and answers

### Why is Goldman Sachs advising against chasing market leaders?

Goldman Sachs warns that market participation is at its narrowest level since the dot-com bubble. Crowded momentum trades face higher risks if leading stocks pull back or laggards catch up.

### What is Goldman Sachs' earnings forecast for the S&P 500?

Goldman Sachs projects S&P 500 earnings per share of $375 in 2026 and $415 in 2027, representing adjusted growth of 29% and 18%, respectively.

### Which stock sectors does Goldman Sachs favor for future gains?

Strategists favor lagging consumer discretionary stocks and consumer experience companies, expecting falling inflation, lower interest rates, and lower energy costs to boost household income in 2027.