Key insights
- Goldman Sachs cut its 2026 US GDP growth forecast by 0.3% to 2.2% and raised its peak unemployment forecast to 4.6% due to higher energy prices. They also pushed back the expected first Federal Reserve rate cut to September. This suggests a slightly more bearish outlook for US equities, driven by concerns about slower growth and a potentially less dovish Fed.
Investing.com -- Goldman Sachs cut its European growth outlook and reshuffled sector recommendations after its commodities strategists revised oil forecasts to $77 per barrel on average in 2026 and gas prices to 46 EUR/MWh on average, the brokerage said in a recent report.
The economists now see Q4/Q4 Euro area growth of 1% this year, with headline inflation expected to peak at 2.9% in the second quarter of 2026, compared with 2% before the war.
The European Central Bank policy forecast was kept unchanged, but the timing of Bank of England cuts was pushed out.
The higher energy outlook fed through to U.S. forecasts, with Goldman Sachs cutting its 2026 Q4/Q4 U.S. GDP growth forecast by 0.3 percentage points to 2.2% and raising its peak unemployment forecast to 4.6%.
The brokerage pushed its first expected Federal Reserve cut from June to September, followed by a second in December, with the terminal rate unchanged at 3%-3.25%.
Goldman Sachs kept its STOXX Europe 600 targets unchanged at 605, 615 and 625 on a 3-, 6- and 12-month horizon, implying 1%, 3% and 4% upside from the March 12 close of 599.
Euro STOXX 50 targets were cut to 5,800, 5,900 and 6,000 from 6,000, 6,100 and 6,200, while FTSE 100 targets were raised to 10,500, 10,600 and 10,800 from 10,100, 10,300 and 10,400.
The STOXX 600 trades at 14.7x forward earnings, against a 2022 trough of 10.4x. "Europe remains attractively valued relative to the US, but it is no longer cheap, offering a smaller valuation buffer should geopolitical risks persist or intensify," the report said.
On sectors, the brokerage upgraded Construction & Materials and Food, Beverage & Tobacco to overweight, raised Energy to neutral and cut Financial Services to neutral. Media was downgraded to underweight, Insurance P&C was added as underweight. Banks remain overweight. Autos and Chemicals remain underweight.
Goldman Sachs forecast 5% EPS growth for the STOXX 600 in 2026 and 7% in 2027, well below bottom-up consensus of 11% and 12% respectively. "EPS resilience does not mean equity resilience," the analysts said.
Of 504 STOXX 600 companies expected to report earnings, 444 had reported, with 67.8% beating estimates by more than 5%. Energy led one-month EPS revisions at 3.5%, while Autos posted the steepest year-to-date decline at 4%.