Goldman Sachs says US stock rally may have more room to run

Why the message matters now

Goldman Sachs is telling clients to look past the day-to-day whipsaws and focus on a simpler question: what has changed enough to let U.S. stocks keep setting records? In Brian Garrett’s telling, the answer is not blind optimism. Garrett, who heads equity execution on the Cross Asset Sales desk in Goldman Sachs Global Banking & Markets, says more record highs could still be ahead for U.S. equities because the rebound has been anchored by cooler geopolitics, a healthy economy, and earnings that have come in stronger than expected.

That framing matters for anyone selling risk, talking flows, or fielding the familiar client question of whether the market has already run too far. Goldman’s pitch is not that volatility is gone. It is that volatility has not broken the underlying case, and that distinction is exactly what clients need when they are deciding whether to add exposure, hedge, or stay patient.

What Goldman thinks is driving the rally

The core argument is that the advance in stocks has been fundamentally supported. Goldman says the S&P 500 fell sharply in March 2026 and then regained its highs by late April, which gives the rebound a very specific shape: a quick drawdown, then a recovery built on better tone rather than sheer speculation. Garrett points to three supports that desks can keep repeating to clients: the geopolitical backdrop has cooled, the economy remains healthy, and earnings have surprised to the upside.

That matters because it changes the burden of proof. If the move had been driven only by a short squeeze or indiscriminate risk-on buying, the conversation would be about exhaustion. Goldman’s message is different. It says the rally still has a macro and earnings foundation, which gives portfolio managers, salespeople, and traders a cleaner way to talk about staying invested even after a run to new highs.

Why record highs do not automatically end the story

Goldman is also leaning on a historical pattern that helps take some emotion out of the debate. The firm says that after the S&P 500 hits a new all-time high, the following month tends to post below-average returns, but the following year has historically been stronger than average. That nuance is useful on the desk because it separates short-term timing from medium-term positioning.

In practice, that means the next few weeks can still be noisy without invalidating the broader thesis. For clients who are tempted to treat every fresh high as a warning signal, Goldman’s history-based message is more measured: the month after a peak may be choppy, but the year after a peak has often been better than people expect. For employees in equities, derivatives, structured products, and discretionary portfolio management, that becomes a practical script for explaining why a market can feel overbought and still be headed higher.

What changed in sentiment and positioning

Goldman says sentiment shifted dramatically during the rebound, moving from quite negative to extremely positive. That swing is important because it highlights the behavioral side of the rally. As stocks recovered, sentiment, positioning, and flow dynamics became harder to ignore, which is exactly the kind of context clients want when they are deciding whether the move is already crowded.

The useful takeaway for client conversations is that a sentiment reset does not have to mark a top. It can also confirm that investors were underexposed during the selloff and are now catching up as the macro picture improves. That is why this story is not just about price action, but about how market psychology can amplify a fundamental recovery. For Goldman teams, especially in cross-asset conversations, this is a reminder to connect the tape to positioning rather than treating each session in isolation.

How Goldman’s broader outlook fits the call

The video lines up with Goldman Sachs Research’s April 29 outlook, which forecast the S&P 500 to rise 6% to 7,600 by year-end 2026. That forecast rested on expected S&P 500 earnings-per-share growth of 12% in 2026 and 10% in 2027, with the index trading at roughly 21 times earnings at the time of the call. In other words, Goldman’s house view is not built on a heroic valuation expansion alone. It is built on earnings growth doing a lot of the work.

That gives employees a second, more concrete client frame: if earnings stay on track and rates cooperate, the index does not need to rely on multiple expansion from a stretched base. Goldman’s April 29 note also said U.S. stocks typically do well when interest rates are falling, which strengthens the medium-term case if the rate backdrop keeps easing rather than tightening again.

The market backdrop behind the headline

The latest record-setting tape helps explain why this message has traction. The S&P 500 closed at 7,398.93 on May 8, 2026, up 0.84% on the day, after both the S&P 500 and the Nasdaq Composite hit new all-time intraday highs and closed at records. The move came alongside stronger-than-expected April payrolls of 115,000, compared with the 55,000 estimate cited by Dow Jones, and a reduction in fears around the U.S.-Iran conflict even as oil prices stayed elevated because of tensions in the Strait of Hormuz.

That mix is exactly the sort of backdrop Goldman teams need to translate for clients. Stronger labor data supports the idea that the U.S. economy remains resilient. Eased geopolitical fear supports risk appetite. Elevated oil prices keep a lid on complacency. Together, they describe a market that is not risk-free, but still capable of climbing.

Why the tape matters for Goldman’s client playbook

This is the practical message Goldman employees can use: the rally can keep going if the fundamentals that powered it remain intact. That means three things have to stay true. First, the geopolitical backdrop cannot deteriorate sharply. Second, the economy has to remain healthy enough to support growth. Third, earnings need to keep beating or at least holding expectations so that the market’s valuation is anchored by real profit growth.

Goldman’s own record-high context also adds perspective. BNY Investments said the S&P 500 set 39 all-time highs during 2025, which was the fifth most in any year since 2000 and the 15th most in the index’s history. That is a useful reminder that repeated highs are not an anomaly on their own. In a year when the market has already normalized record after record, the more relevant question is not whether another high is possible, but whether the conditions that produced the last one are still in place.

For Goldman’s trading, sales, and advisory teams, that is the message to keep close: clients do not need a prediction that markets will rise every week. They need a framework for why a volatile tape can still produce higher highs, and Goldman’s answer is that earnings, growth, and sentiment are still doing enough work to keep the bullish case alive.