Goldman Sachs says Q1 earnings to test whether strong EPS can steady US equities

In its weekly Kickstart note, Goldman Sachs notes that the S&P 500 is down 9% from its January peak, with its P/E ratio falling from 21x a month ago to around 19x as oil prices, interest rates and geopolitical uncertainty increased. Analysts, however, have raised 2026 EPS forecasts by 3%.
GS writes that, from a technical perspective, last week’s fall in positioning suggests a better near-term distribution of outcomes for US equities: its equity sentiment indicator is at the lowest since August 2025, adding that current positioning alone appears insufficient to lift markets without improved fundamentals.
In terms of the fundamentals, the bank says that S&P 500 earnings are expected to grow solidly in 2026 unless disruption is severely prolonged. Its base case is for 12% EPS growth, but adverse scenarios would imply slightly weaker growth; AI investment is seen contributing 40% of EPS growth this year. It adds that historically after past oil supply shocks, 12 month EPS growth ranged from -15% in 1990 to +18% in 2003.
Ahead of the Q1 earnings season, Goldman says consensus expects Q1 EPS growth of 12% Y/Y, a sixth straight double-digit quarter, with median stock EPS growth of 8%. IT is forecast seen growing EPS by 44%, contributing some 87% of index growth, and that should keep AI capex as a primary focus.