Goldman Sachs has upgraded global equities to overweight over a three-month horizon, setting a bullish tone as four major U.S. banks with a combined market valuation of $1.6 trillion prepare to open their quarterly financial reports before Tuesday's opening bell.
Goldman Sachs Shift and Q3 Earnings Expectations
According to Bloomberg, a strategy team led by Christian Mueller-Glissmann upgraded stocks to overweight for three months and bonds to overweight over a 12-month period. The strategists cited improving valuations, resilient corporate earnings, and easing inflation supporting markets toward 2027. Bloomberg Intelligence projects overall S&P 500 earnings growth to jump 25% this quarter, a forecast Goldman Sachs expects companies to beat.
The market test begins with quarterly results from Goldman Sachs, JPMorgan, Citigroup, and Wells Fargo. Based on Nasdaq consensus estimates, Citigroup and JPMorgan face the highest expected year-over-year profit per share growth targets at 19% and 17%, respectively. Meanwhile, Wells Fargo faces a 7% growth bar, and Goldman Sachs faces a 5% growth expectation.
Underlying Market Stress and Economic Factors
Despite the S&P 500 trading near record highs, broader market participation remains narrow. Data from Barclays and The Kobeissi Letter shows that 84% of S&P 500 stocks are currently trading at least 10% below their all-time highs, reflecting significant broader equity market drawdowns. Sector drawdowns of 10% or more affect 97% of Real Estate stocks, 96% of Materials, 94% of Utilities, and 92% of Consumer Discretionary shares.
Investor skepticism persists due to borrowing costs, with U.S. Treasury yields lingering near 24-year highs. Speaking on CNBC, investor Steve Weiss noted he does not view the quarter as a "slam dunk," anticipating banks will remain cautious regarding mergers due to high debt costs. Money manager Jenny Harrington indicated that market reaction to results will be more telling than the reported numbers, while KBW's Tom Michaud emphasized that bank stocks face continued pressure until interest rates settle ahead of upcoming U.S. inflation data scheduled for release Wednesday.
Key Takeaways
- Goldman Sachs upgraded equities to overweight over 3 months and bonds over 12 months.
- Four major banks worth $1.6 trillion—JPMorgan, Citigroup, Wells Fargo, and Goldman Sachs—report earnings before Tuesday's open.
- Projected YoY EPS growth stands at 19% for Citigroup, 17% for JPMorgan, 7% for Wells Fargo, and 5% for Goldman Sachs.
- Market breadth remains weak, with 84% of S&P 500 equities trading at least 10% off their record highs.
Why It Matters
As major institutions weigh in on Wall Street bank earnings performance, bank results serve as a direct gauge for corporate health and broader macroeconomic stability. With federal interest rates and bond yields maintaining multi-decade highs, sustained bank profitability is necessary to justify current equity valuations outside of megacap technology stocks. If financial earnings miss forecasts across the board, market risk appetite could contract rapidly across both traditional and digital asset sectors.
