Goldman Sachs Sees S&P 500 Rising 14% to 8,700, Says Tech Selloff Has Made Cloud Giants Cheaper

Goldman Sachs strategists expect the S&P 500 to rise about 14% to 8,700 over the next 12 months, Bloomberg reported on November 13. The team, led by Peter Oppenheimer, recommends overweighting US and Japanese stocks and underweighting European stocks in 2027.The S&P 500 is up 11% so far this year.Tech Selloff Leaves Cloud Giants CheaperA key reason for Goldman’s optimism on US stocks is valuation. After the recent selloff in large tech stocks, hyperscalers, the big cloud computing providers, now trade well below their historical valuations, according to Goldman.The Nasdaq 100 has fallen about 9% from its early-October high, pressured by concerns about AI infrastructure spending and the board investigation at Nvidia. Goldman still sees tech, especially the large cloud providers, as relatively defensive. It said that although leading companies’ cash flow has turned negative, their balance sheets remain healthy, including measures such as net debt to equity.Earnings Growth Set to Slow in 2027Goldman expects earnings per share growth to slow sharply next year:Index20262027 forecastS&P 50036%11%Stoxx Europe 60018%7%As growth slows, Goldman expects companies that can keep growing quickly over the long term to earn higher valuations. The team also favors sectors that usually benefit from falling bond yields, easing inflation and lower oil prices. That view looks past current conditions: US 10-year yields have just risen above 5% and markets are pricing a Fed rate hike in December.Europe Underweight Despite Record HighGoldman recommends underweighting European stocks even though the Stoxx Europe 600 hit a record high this week, helped by earnings and money moving out of AI stocks. The bank said European valuations have fallen less than in other regions, and that government debt problems and a busy political calendar add risk.The call runs against Citi’s view. On November 9, Citi cut US stocks to neutral and upgraded European stocks outside the UK to overweight.