Quick overview

---

Goldman Sachs argues that strong corporate earnings growth continues to underpin global equity markets, particularly in the technology and energy sectors.

However, the bank warned that investor optimism may be running ahead of fundamentals as higher oil prices, rising interest rates, and tightening global financial conditions create new risks for stocks.

Despite the closure of the Strait of Hormuz, a sharp increase in oil prices, and growing concerns over a potential global stagflation scenario, major equity markets continue to trade near record highs. According to Goldman Sachs, the key reason behind this resilience remains unchanged: corporate profits are still expanding at a healthy pace, supporting investor demand for risk assets.

In a report led by strategist Peter Oppenheimer, the bank projected global nominal GDP growth of 5.9% this year, up from 4.7% in 2025. Such an environment, Goldman noted, continues to provide favorable conditions for earnings growth even amid a more challenging geopolitical backdrop.

“Earnings growth remains robust,” Goldman wrote, explaining why investors have largely maintained their exposure to equities despite rising international uncertainty.

Technology and Energy Continue to Drive the Rally

According to the bank, the market’s advance is being led primarily by technology and energy companies, which account for a significant share of upward earnings revisions for the coming years.

Consensus forecasts for S&P 500 earnings per share in 2026 and 2027 have been revised higher by eight percentage points since the start of the year. The upgrades reflect stronger expectations for artificial intelligence-related investment and higher energy prices following escalating tensions in the Middle East.

Goldman cautioned, however, that the rally remains highly concentrated. The S&P 500 has gained nearly 10% so far in 2026, with roughly 85% of that performance coming from companies in technology, media, and telecommunications.

Meanwhile, markets benefiting directly from the global semiconductor boom have posted even stronger returns. South Korea’s stock market, for example, has surged nearly 80% year-to-date.

Warning Signs Are Emerging

While market conditions remain supportive, Goldman Sachs has begun to identify signs of growing investor complacency.

The bank noted that its Risk Appetite Indicator climbed above 1.1 last week, placing it in the 99th percentile of readings since 1991—a level historically associated with excessively optimistic market sentiment.

Retail trading activity has also accelerated, rising 28% since mid-April, signaling increasingly aggressive participation from individual investors.

At the same time, equity risk premiums continue to compress even as sovereign bond yields move higher, a combination that is raising concerns across Wall Street.

According to Goldman, a prolonged disruption to oil supplies during the second half of the year, coupled with rising inflation expectations, could ultimately trigger a correction in equity markets despite the current strength in corporate earnings.