Goldman Sachs predicts a 2026 earnings explosion, but the market seems oblivious to this potential goldmine.
The AI hype might be overshadowing the real winners. While AI and mega-cap tech giants dominate the headlines and investor attention, Goldman Sachs suggests that the 2026 earnings boom will be led by seemingly mundane cyclical sectors. And this is where it gets intriguing...
According to Goldman's analysts, sectors like Industrials, Materials, and Consumer Discretionary are poised to experience the most significant earnings growth in 2026. This prediction is based on their expectation of an economic growth acceleration, which will benefit these cyclical sectors the most. And the firm's optimism isn't just based on earnings; they also anticipate easing tariff pressures.
Real estate and consumer discretionary companies are expected to see substantial earnings per share (EPS) growth, with real estate rising from 5% to 15% and consumer discretionary from 3% to 7%. Industrial companies are also in for a surprise, with EPS growth projected to skyrocket from 4% to 15%.
But here's where it gets controversial: Goldman Sachs believes that the EPS growth for information technology companies will slow down, from 26% in 2025 to 24% in 2026. This is in stark contrast to the current market focus on AI and tech giants.
This shift is already evident in market trends. Cyclical stocks have been outperforming defensive names for the longest streak in over 15 years. Yet, Goldman's analysts argue that investors aren't fully appreciating the potential of this growth. Despite the cyclical rebound, market positioning suggests a more conservative growth expectation, which Goldman believes is too cautious.
The bank's analysts predict an overall US growth pickup in 2026, leading to a 12% increase in S&P 500 earnings per share. This forecast comes at a time when investors are questioning whether AI enthusiasm is inflating a speculative bubble in the stock market.
As the S&P 500 rises by 16% this year, with megacap tech stocks making up a significant portion, and AI chipmaker Nvidia's shares soaring, Goldman Sachs's perspective offers a different angle. They suggest that the market might have already factored in most of AI's potential, and the real growth opportunities lie elsewhere.
So, is the market missing out on the next big thing? Are cyclical sectors the hidden gems of 2026? Share your thoughts in the comments, and let's explore the possibilities together.
