S&P 500: Hidden Stress & Potential Outperformers – Goldman Sachs

Hidden Volatility Beneath Steady S&P 500 Rise

Despite a seemingly stable performance for the S&P 500 this year, underlying market conditions reveal significant stress, according to John Storey, Co-Head of Equities Distribution at Goldman Sachs Global Banking & Markets. Storey’s observations, shared on March 18, 2026, suggest a divergence between the index’s overall trajectory and the choppier activity occurring at the individual stock level.

This dynamic highlights a growing disconnect between broad market indicators and the realities experienced by investors navigating individual securities. While the S&P 500 has presented a relatively calm facade, the volatility experienced within its constituent companies suggests a more complex and potentially fragile market environment. Storey’s comments point to a need for investors to look beyond headline figures and delve deeper into the performance of individual holdings.

The assessment comes as investors grapple with ongoing geopolitical uncertainty and shifting economic forecasts. Goldman Sachs recently adjusted its S&P 500 forecast downward, projecting a rise to 6200 by year-end – a 7% increase – compared to a previous estimate of 6500. This revision reflects concerns about slower GDP expansion, rising tariffs, and increased overall market uncertainty, as noted in a report released on March 26, 2025. The firm also lowered its earnings-per-share growth forecast to 7% from 9%, estimating average company profits at $262 per share for the financial year, down from a prior estimate of $268.

Interestingly, despite these headwinds, Goldman Sachs strategists, including Ben Snider, suggest that much of the negative impact from factors like elevated oil prices and weaker US GDP growth may already be priced into the market. A report published on March 19, 2026, indicates a belief that the S&P 500 could resume its upward climb, following a historical pattern observed after geopolitical risk events. This optimistic outlook is supported by the continued strength of the fundamental engine of earnings growth and a moderation in valuations.

Looking ahead, Storey suggests that “asset-heavy” companies may be poised to outperform. This implies a potential shift in investor preference towards companies with substantial tangible assets, possibly as a hedge against economic uncertainty or inflationary pressures. This observation aligns with a broader trend of investors seeking refuge in value stocks and companies with strong balance sheets during periods of market volatility.

Goldman Sachs’ analysis also acknowledges the possibility of a recession, assigning a 20% probability to an economic downturn within the next 12 months – slightly above the historical average. Historically, the S&P 500 has declined by 24% from its peak during recessions, with earnings dropping by 13%. However, the firm emphasizes that short-term market declines often present buying opportunities, particularly if the economy and earnings eventually recover. The S&P 500 has experienced a median yearly drawdown of 10% over the past 40 years, mirroring the 10% decline experienced earlier this year.

The firm’s forecasts also anticipate the S&P 500 reaching 7,600 by the end of 2026, representing an 11% gain from current levels. This projection is underpinned by expectations of rate cuts and resilient earnings. Despite trade policy uncertainties and potential tariff impacts, Goldman Sachs projects 7% earnings per share (EPS) growth for the S&P 500 in both 2025 and 2026.

Investors should monitor the interplay between macroeconomic factors, individual stock performance, and the evolving outlook for earnings growth and interest rates. The apparent disconnect between the S&P 500’s overall stability and the volatility within its components suggests a need for careful stock selection and a nuanced understanding of the underlying market dynamics.