Goldman Sachs forecasts that earnings growth for companies based in the United States will continue, despite the fact that the trend of earnings exceeding analyst estimates is anticipated to become less frequent.
A recent statement from the bank highlighted the fact that 51% of the companies that make up the S&P 500 outperformed their projections for the third quarter by at least one standard deviation. This figure is slightly higher than the historical average of 49%, but it is lower than the average of 57% that has been observed over the past six quarters.
The technology industry, and more specifically businesses that are engaged in artificial intelligence, has been a substantial contribution to the growth of these earnings. As an illustration, Nvidia, a renowned artificial intelligence chip creator, has reported significant revenue growth, which are a reflection of the increased demand for infrastructure associated to AI.
Taking a look into the future, Goldman Sachs forecasts that earnings per share for the S&P 500 would expand by 11% in 2025, and then by 7% in 2026. It is important to note that these projections are susceptible to a variety of potential hazards, such as the possibility of policy shifts under the administration of President Trump, which may include modifications to tax rates and the imposition of tariffs. Despite the fact that a drop in corporate tax rates could potentially increase earnings, the bank adds that the introduction of tariffs could potentially have a negative impact on profits due to decreased consumer spending and retaliatory measures that would hurt exports from the United States.
Despite the fact that Goldman Sachs continues to maintain a positive outlook on earnings growth, the company cautions investors to exercise caution owing to the possibility of policy alterations that could have an impact on future financial performance.