The bull market is a glutton. It demands more than just survival. It demands growth. Goldman Sachs just published its 2026 US Equity Outlook. The firm predicts a fourth consecutive year of green candles. This is the Goldilocks narrative on steroids. The consensus is bullish. Wall Street is betting on a soft landing that has already landed. The data suggests the rally is not just a tech fever dream. It is a fundamental shift in the liquidity cycle.
The Liquidity Injection
The Fed is cutting. Liquidity is the drug of choice. Wall Street is addicted. According to the latest market data from Reuters, the Federal Reserve’s pivot in late 2025 has finally trickled down to the cost of capital. Lower rates act as a gravity-defying force for valuations. When the discount rate drops, the present value of future cash flows rises. This is basic finance. It is also the primary engine for the 2026 forecast. Goldman Sachs Research argues that continued easing will support a higher price-to-earnings multiple than we saw in the previous decade. The neutral rate, often called R-star, is being recalibrated. If the Fed can keep inflation near 2 percent while lowering the Fed Funds Rate, the equity risk premium remains attractive.
Earnings are the second pillar. Corporate America is leaner. The productivity gains from the 2024 to 2025 AI integration cycle are starting to hit the bottom line. This is not just about chatbots. It is about automated supply chains and algorithmic pricing models. Per the Bloomberg terminal feed, S&P 500 earnings per share are projected to grow by 12 percent this year. This growth is broad-based. It is no longer just the Magnificent Seven carrying the weight. We are seeing a rotation into mid-cap industrials and financial services. These sectors benefit from a steepening yield curve and a resilient consumer.
The Chart of Momentum
Visualizing the streak is essential. We have not seen four straight years of gains since the post-2008 recovery. The momentum is undeniable. The following chart illustrates the annual returns leading into the current 2026 forecast.
Sector Specific Realities
Not all sectors are created equal. The 2026 rally is selective. Technology remains the leader, but the valuation gap is narrowing. Investors are looking for value in forgotten corners. Financials are seeing a resurgence as the threat of a recession fades. Banks are releasing loan loss reserves. This adds a direct boost to net income. Healthcare is also seeing a tailwind from new GLP-1 applications and genomic breakthroughs. The market is moving from a momentum-driven phase to a fundamental-driven phase. This is a healthy sign for long-term stability.
| Sector | Projected EPS Growth | Forward P/E Ratio |
|---|---|---|
| Information Technology | 14.5% | 28.4 |
| Financials | 9.2% | 14.1 |
| Healthcare | 8.8% | 19.2 |
| Consumer Discretionary | 7.4% | 21.5 |
| Energy | -2.1% | 11.5 |
Risk still exists. The cynical view suggests that the market is priced for perfection. Any hiccup in the Fed’s easing path could trigger a sharp correction. We are also watching the geopolitical situation in the Middle East and Eastern Europe. Supply chain shocks are the primary threat to the inflation target. If oil spikes, the Fed’s hands are tied. They cannot cut into a rising CPI. This is the nightmare scenario for the Goldman forecast. However, the current data shows a cooling labor market that is not yet freezing. This is the sweet spot for equity prices.
The Technical Mechanism
Look at the corporate buyback programs. They are at record levels. Companies are using their massive cash piles to reduce share counts. This artificially inflates EPS even if top-line revenue growth is modest. It is a financial engineering feat that has become a standard part of the bull market playbook. According to SEC filings from the last quarter, buyback authorizations have increased by 15 percent year over year. This provides a floor for the market. Every dip is being bought by the companies themselves.
The retail investor is also back. After the volatility of 2024, the retail crowd has found its footing. Margin debt is rising, but it remains below the 2021 peaks. This suggests there is still room for leverage to drive prices higher. The sentiment is not yet at the ‘irrational exuberance’ stage, but it is getting close. Goldman Sachs is betting that the momentum carries through the end of the year. They are looking at the solid economy as a shield against volatility. Consumer spending remains robust, supported by a wealth effect from rising home prices and stock portfolios.
The next major data point arrives on April 15. We will see the first look at Q1 2026 tax receipts and corporate guidance for the summer months. If the 12 percent EPS growth target holds through the first quarter, the path to a fourth straight year of gains is clear. Watch the 10-year Treasury yield. If it stays below 3.8 percent, the bull remains in control.
