Gold prices edge higher on raised Fed rate cut hopes
Investing.com -- The S&P 500 continued to advance last week as the second-quarter earnings season delivered a strong start, with 61% of companies beating estimates by more than one standard deviation—well above the historical average of 48%, according to Goldman Sachs.
The Wall Street bank maintains its bullish outlook and now forecasts the index will climb 10% to 6900 over the next 12 months, supported by resilient earnings and investor focus on 2026 growth.
Despite headline risks from new tariff announcements, equity markets have largely shrugged off trade concerns.
David J. Kostin, Goldman’s chief U.S. equity strategist, said that “investors appear to be looking through potential near-term economic and earnings weakness and focusing instead on the prospect for robust growth in 2026.”
Breadth in earnings revisions has reached its highest level since 2022, led by sectors such as Information Technology, Financials, and Communication Services.
“The outperformance of cyclical industries suggests the equity market is pricing an outlook for solid GDP growth despite consensus expectations for sluggish growth in coming quarters,” Kostin added in a recent note.
One tailwind supporting earnings is the weakening U.S. dollar. The trade-weighted dollar has fallen 7% year-to-date, and Goldman’s FX team sees a further 4% decline by year-end.
“In our macro model, a 10% decline in the dollar is associated with a boost of roughly 2-3% to S&P 500 EPS, all else equal,” the note said.
This environment favors firms with greater international exposure. The Nasdaq 100, which derives 45% of its revenues from outside the U.S., has benefited more than small caps, with the Russell 2000 generating only 20% abroad.
Goldman Sachs’ basket of international-facing stocks has outperformed its domestic-facing counterpart by four percentage points year-to-date.
Still, Kostin cautions that “an escalation in the trade conflict represents a key risk to companies with elevated foreign revenues.”
Equity markets appear largely unfazed by the latest tariff hike announcements. While stocks with broad tariff exposure sold off sharply following similar headlines earlier this year, the S&P 500 recently hit a new record high and Goldman’s ‘Tariff Risk’ basket remains just 4% below its peak.
According to Kostin, client conversations suggest many investors expect the eventual tariff rates to be lower than those currently proposed.
In addition, recent economic data suggest tariffs are having less impact on consumer spending, inflation, and the labor market than previously feared. June core CPI came in below expectations, while retail sales and jobless claims both exceeded forecasts.
Goldman’s forecast for further near-term gains in the S&P 500 rests on investors maintaining confidence in the longer-term earnings outlook.
The bank expects the index to reach 6600 in six months and 6900 over the next year, but warns that if sentiment around 2026 earnings weakens, the market could fall short of these targets.