Geopolitics takes a back seat; the real driving force of U.S. stocks in 2026 is still "profit is king."

The U.S. stock market in 2026 is showing a trend of decreasing concentration, with earnings growth emerging as the core driver of market gains. Goldman Sachs projects the S&P 500 Index will rise to 7,600 points in 2026, primarily propelled by a 12% increase in earnings.

The market structure is undergoing significant changes. Since entering 2026, the "Magnificent Seven" tech giants—including Nvidia, Apple, Microsoft, Alphabet (Google's parent company), Amazon, Tesla, and Meta—have collectively fallen about 0.5%, while the remaining 493 constituents of the S&P 500 have collectively risen by 2.5%. As investors reallocate assets at the start of the year, the industrials, healthcare, and technology sectors have performed notably well during the first three trading days of the year.

Chris Hussey, Managing Director at Goldman Sachs, noted that the acceleration of U.S. economic growth combined with looser monetary policy is set to drive cyclical sectors higher at the beginning of 2026, including small-cap stocks, stocks targeting middle-income consumers, and companies related to the nonresidential construction cycle.

Ben Snider, Senior Portfolio Strategist at Goldman Sachs, emphasized that earnings growth contributed 14 percentage points of the S&P 500’s 16% price return in 2025, and has accounted for 8 points of the index’s 9% annualized increase since 1990. With robust economic growth and a continued accommodative macro backdrop from the Fed, Goldman Sachs forecasts S&P 500 constituents’ earnings per share (EPS) to grow by 12% in 2026 and by 10% in 2027.

Five Major Investment Themes Leading the Market

Chris Hussey put forward five major themes for U.S. stocks in 2026. First is mid-cycle acceleration, recommending increasing exposure to cyclical stocks, including industrial cyclicals, power, and residential HVAC-related stocks.

Second is "large scale releveraging." As companies increase borrowing to invest in their future, financials will benefit, while companies able to maintain strong free cash flow and return capital to shareholders also merit attention.

The third theme focuses on the implementation of artificial intelligence (AI). Investment opportunities will arise in companies deploying AI solutions to reduce costs, and in select software stocks capable of delivering new applications.

The fourth theme is the "revival of the art," referring to the expected rebound in IPO scale, surge in M&A activity, and continued market rise, which should enable private equity to achieve exits, distributions, and fundraising recovery in 2026. This should help alternative asset management stocks rebound in value after volatility in 2025.

The final theme is value investment opportunities. After unexpectedly strong performance in 2025, wider valuation gaps and a favorable macroeconomic outlook suggest that the value factor will continue to perform well at the start of 2026. Healthcare should be a rich source of value stocks.

Three Major Risks to Watch

Goldman Sachs also identified three key risks. The first is the risk of economic recession triggered by deteriorating employment; the second is the potential drag on the overall economy from a slowdown in AI growth; and the third is interest rate risk.

Although Goldman Sachs’ rate strategists forecast that the 10-year U.S. Treasury yield will remain moderately volatile over the next year, rapid GDP growth typically accompanies a rise in the 10-year yield, which, if realized, could pose headwinds for the stock market.

Supported by healthy U.S. economic growth and continued accommodative Federal Reserve policies, earnings growth—rather than geopolitical factors—is becoming the fundamental driver determining the direction of the stock market.

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