Goldman Sachs: the S&P 500 could reach 8,000 by year-end

The Middle East situation remains largely unchanged: although 25 ships recently passed through the Strait of Hormuz, it was done in coordination with its navy and with Tehran’s approval. So the problem remains unsolved, and since the positions of both sides remain fundamentally opposed, it is still unclear when a tangible breakthrough in negotiations will happen.

And even if we assume the parties agree to a 60-day ceasefire, restoring oil production and supply chains would still take several months. Back in April, the average forecast from external agencies suggested that Gulf producers could recover about 70% of lost output within three months and around 88% within six months.

In other words, physical oil prices are unlikely to fall sharply even on good geopolitical news. Inflationary pressure from elevated energy prices would therefore persist, giving the Federal Reserve little reason to rush into rate cuts.

Yet judging by the Nasdaq, S&P 500, and Dow Jones, investors do not seem particularly concerned, apparently following the strategy: eventually the crisis will pass, stocks will go higher, so why risk missing the rally?

Even major banks are no longer looking for reasons why the market could fall. Goldman Sachs, for example, raised its 2026 year-end forecast for the S&P 500 from 7,600 to 8,000, citing continued strength in corporate earnings.

And indeed, according to FactSet, the “Magnificent 7” delivered 63.2% earnings growth in Q1, the strongest since Q2 2021, while the remaining 493 S&P 500 companies posted 17.4% growth, their best result since late 2021.

The thing is, Nvidia, Broadcom, AMD, Micron, and Intel alone accounted for more than 50% of the S&P 500’s growth, largely driven by the AI boom, and although LLMs may already have changed everyday life for millions of people, many AI services still generate very little real profit. It also raises concerns that part of Big Tech’s strong results stems from companies signing new deals with one another to signal expansion. 

So the risk that what we are seeing is yet another market bubble is there. 

It is impossible to say exactly when it could burst, but as a reminder, in December 2007, Credit Suisse strategists forecast that the S&P 500 would rise another 13% to a record high by the end of 2008…