Goldman has moved away from its darkest long-run S&P 500 case
Business Insider reported on July 4, 2026 that Goldman Sachs has raised its expected annualized S&P 500 return for the next decade to about 7%, compared with a 3% forecast made in 2024. The change matters because the earlier forecast had been widely framed as a possible "lost decade" for U.S. equities.
The update does not mean Goldman is calling for unusually high returns. It means the bank appears less convinced that today’s elevated valuations must quickly revert toward older historical averages. The central argument, as reported by Business Insider, is that high profit margins and relatively low interest rates can keep valuation multiples higher than older models might imply.
What is confirmed
The original Business Insider article says Goldman’s previous 2024 view pointed to roughly 3% annualized S&P 500 returns over the following decade, while the newer estimate is around 7%. It also says Goldman still sees the new estimate below the market’s longer-run historical average.
Goldman’s own 2026 research updates give useful context for why the bank is more constructive near term. On May 28, 2026, Goldman Sachs Research said it raised its year-end 2026 S&P 500 target to 8,000 from 7,600, implying a 6% return from May 26. In the same update, Goldman said its strategists lifted S&P 500 earnings-per-share forecasts to $340 for 2026 and $385 for 2027, with AI-infrastructure beneficiaries expected to account for roughly half of this year’s earnings growth.
An earlier Goldman Sachs Research article from April 29, 2026 also described the S&P 500 trading near 21 times forward earnings. Goldman said that valuation was high relative to history, but closer to fair value in its framework because companies were generating near-record profits and interest rates remained relatively low.
Why the forecast changed
The important shift is not a single number. It is the weighting Goldman appears to put on structural profitability and discount rates.
Traditional valuation models often treat a high cyclically adjusted price-to-earnings ratio as a warning sign for weaker future returns. That logic has not disappeared. But if profit margins stay elevated for longer, and if rates do not force a sharp valuation reset, the path for returns can be less severe than a simple mean-reversion model would suggest.
Goldman’s recent public work also points to a different composition of market support. In its May update, the firm said the 2026 rally had been powered by corporate profit growth rather than rising valuation multiples. That distinction is central for investors: a market led by earnings can be more defensible than one led only by multiple expansion, but it still depends on companies delivering the profits analysts expect.
The AI earnings factor
AI is one reason the debate has become more complicated. Goldman’s May 2026 update said AI-infrastructure beneficiaries could account for roughly half of S&P 500 earnings growth this year, with semiconductors, technology hardware, industrials and utilities among the areas receiving support from the buildout.
That helps explain why a broad index can look expensive while still attracting higher earnings forecasts. But it also creates concentration risk. If AI capital spending slows, or if enterprise users do not turn that spending into measurable productivity gains, the earnings support behind the index could weaken faster than headline forecasts suggest.
What investors should take from it
The practical takeaway is balance. Goldman’s revised long-run view is less pessimistic than its 2024 forecast, but it is not a guarantee of strong returns and it is not a direct recommendation to buy the index. The revised case still rests on assumptions about margins, rates, earnings growth and the durability of AI-related profits.
For diversified investors, the debate reinforces three watchpoints: whether S&P 500 earnings keep rising broadly, whether high margins survive input-cost and wage pressure, and whether valuation multiples can stay elevated without a larger decline in Treasury yields.
The risk is that markets treat a higher 10-year return forecast as certainty. The opportunity is that investors can use the forecast as a framework: long-run equity returns may be better than the most pessimistic models suggested, but the path is likely to depend on fundamentals rather than simple momentum.