The current environment suggests that European corporate earnings might outpaced GDP growth as indicated by Goldman Sachs. Per the full note, Goldman’s research anticipates earnings growth in Europe to exceed economic growth rates for both 2026 and 2027, attributing this to strong consumer demand and a resilient business landscape. This optimistic outlook comes amidst heightened M&A activity and inflation concerns, positioning European equities as attractive despite macroeconomic uncertainties. Given the divergence between earnings and GDP performance, the euro may exhibit relative strength against the dollar in the medium term.
What the desk is arguing
Goldman Sachs posits that European corporate earnings will outperform euro area GDP in the coming years, signifying a potential decoupling of stock market performance from economic growth. This assertion highlights a robust demand landscape that supports strong earnings growth, even in an inflationary environment.
According to Goldman Sachs, corporate earnings are projected to exceed GDP growth for 2026 and 2027, which could reinforce investor confidence in European equities. This outlook indicates a favorable near-term trajectory for these markets, pushing traders to reassess their positions in euro-related currencies.
Where it sits in our coverage
Our consensus target for EUR/USD is currently set at 1.075, with a range spanning from 1.04 to 1.12. Notable firms include: - jpmorgan: Target of 1.10 (Mar26) - bofa: Target of 1.04 (Mar26)
This view from Goldman Sachs aligns closely with jpmorgan, who holds a similarly bullish stance, while it diverges sharply from bofa, which remains more bearish on the euro's outlook.
How other firms see it
While jpmorgan and other bullish firms align with this optimistic view on European earnings, bofa offers a contrasting perspective, remaining cautious due to potential economic headwinds. Their forecasts suggest that there could be obstacles in sustaining growth in earnings over the next two years.
Traders should keep an eye on the EUR/USD trajectory as it relates to the broader European economic indicators and central bank decisions which could heavily influence market sentiment.
01Goldman Sachs forecasts European earnings to grow faster than GDP in 2026 and 2027.
02Strong consumer demand is cited as a key driver for robust corporate earnings.
03The divergence of earnings growth from GDP may bolster European equities' attractiveness.
04Market reactions to corporate earnings reports will be key indicators moving forward.
Market implications
Watch for EUR/USD movements around the 1.075 level as European earnings reports come out in the next quarter, potentially influencing trader sentiment significantly. Pay attention to shifts in investor positioning that could result from earnings surprises.
Risks to this view
Should geopolitical tensions escalate or inflation persist, changes in consumer spending could impair corporate earnings, undermining the bullish outlook set forth by Goldman Sachs. A substantial economic downturn could also reverse this earnings growth trend.
Why European earnings are defying GDP .keep-white { color:#ffffff !important; } .keep-black { color:#000000 !important; } .gsFooterGrey * { color:#000000 !important; } ul.gsFlushList li { text-indent:-1em !important; margin:0 0 0 25px !important; } table { border-collapse:collapse; border-spacing:0; } img { height:auto !important; } .gsContentWidth { width:640px !important; } Briefings Newsletter ( ) Briefings Newsletter ( ) The key insights ( ) today: ▪ Goldman Sachs President and Chief Operating Officer John Waldron shares his expectations for 2027 amid strong M&A activity and a higher cost of capital. ▪ Will US stocks follow their historical pattern after midterms? ▪ European company earnings are forecast to outstrip euro area GDP in 2026 and 2027, according to Goldman Sachs Research. ▪ Goldman Sachs Research has raised its outlook for the music industry for the first time in three years as the industry’s growth narrative evolves from one centered primarily on streaming adoption toward one focused on monetization. ▪ Briefings Brainteaser: Which of these assets has returned the most this year? Want to sign up and stay connected? Click here ( ).
Clients Are Optimistic—But More Cautious—About 2027 ( ) John Waldron with host Allison Nathan on Goldman Sachs Exchanges Investors and business leaders are generally optimistic about the outlook for 2027 even as geopolitical uncertainty, inflation, and higher interest rates have prompted greater caution relative to the beginning of 2026, according to John Waldron, president and chief operating officer of Goldman Sachs. The higher cost of capital and of doing business is a challenge for companies, Waldron says on the Goldman Sachs Exchanges ( ) podcast. At the same time, he says, “there's plenty of good things going on”—particularly in the US, where nominal economic growth is robust and the consumer is resilient. “Most companies are seeing pretty strong end demand, and we still have very strong earnings.
So I'm still on the side of optimism when I think about our clients and what they're feeling,” Waldron says. Companies are increasingly turning to mergers and acquisitions (M&A) as they seek scale, which brings with it the ability to attract more capital and generate better returns. Waldron expects corporate M&A to grow 30%-35% in 2026, which he says could make 2026 a record year for M&A.
He views this as a sign that executives are positive about their companies and the operating environment. “CEOs are not going to do M&A transactions if they're not feeling confident in their own business.” Watch the full episode ( ) for more of Waldron’s views on the outlook for capital markets and Goldman Sachs’ strategy. Will US Stocks Follow Their Historical Pattern after Midterms? The S&P 500 fell Thursday after the US midterm elections sparked a selloff in tech stocks.
The volatility raises the question: Will US equities follow their usual historical pattern of rallying after the midterm polls? Across 18 midterms, the S&P 500 index rose on average 7.5% through year-end, 13.9% over six months, and 15.5% over 12 months, according to Goldman Sachs FICC and Equities. In all 18 instances, the S&P 500 was higher both six and 12 months after the midterms.
The Nasdaq 100 fell about 5% on Thursday and the S&P 500 declined 3%. “We are not seeing buyers step in to defend anything just yet,” John Flood, head of Americas Equities Execution Services in Goldman Sachs FICC and Equities, wrote in a note on Thursday. Why European Companies Are Forecast to Have Robust Earnings Growth ( ) European stock returns have pulled ahead of US equities this year (as of November 6, in local-currency terms), after the results of the US midterm elections sparked a selloff in tech stocks. Strong earnings growth has helped Europe’s stock market absorb higher bond yields, elevated energy prices, and subdued domestic economic growth this year, writes Sharon Bell, senior European equity strategist for Goldman Sachs Research, in a report.
Our strategists expect European earnings to continue outstripping domestic economic growth. They forecast earnings per share for Europe’s STOXX 600 index to grow 18% in 2026 and 7% in 2027. Meanwhile, euro area nominal GDP is forecast to grow 3.3% in 2026 and 2.8% in 2027.
The composition of sectors represented among Europe’s biggest stocks could help explain the divergence. “The equity market is a distorted mirror of the economy,” Bell writes. Financial sector companies account for more than 30% of STOXX earnings, but only 10% of euro area economic activity. Energy and technology are also more important to listed earnings, while real estate, retail, and industrials have larger weights in the economy relative to the STOXX 600 index.
Country exposure also matters. Listed companies now generate most of their revenues outside their country of domicile, and only around a third of STOXX 600 companies’ sales are generated in the euro area today (compared with 60% from the same countries in 1990). And a weaker euro raises the translated value of overseas profits.
Read more of our insights on Europe’s economy and financial markets ( ). The Outlook for the Music Industry amid Streaming Growth Global music industry revenues are expected to reach approximately $200 billion annually ( ) by 2035 amid an improving outlook for subscription streaming. Goldman Sachs Research expects revenues to increase at a compound rate of 5.8% per year between 2025-2035. ( ) The forecast represents the first time in three years that Goldman Sachs Research has raised its long-term outlook for the industry, Stephen Laszczyk and Eric Sheridan write in the team’s 2026 edition of the annual “Music in the Air” report. “While growth is likely to moderate from the pace observed during the industry's streaming adoption phase, we continue to see a long runway for industry expansion supported by favorable consumer behavior and an increasingly diversified monetization model,” Laszczyk and Sheridan write. * Emerging markets are poised to drive growth in paid subscription streaming revenue.
The percentage of internet users with paid streaming subscriptions in emerging markets is forecast to rise from 10% in 2025 to 15% in 2035. And revenue per user is rising in developed markets, with more consistent price increases expected from streaming platforms as music labels increasingly incorporate higher royalties into their contracts and streaming platforms introduce new premium service tiers. * Despite pressure on consumer wallets from tariffs, oil prices, and higher interest rates, our analysts expect the market for live music to grow 6% in 2026. They believe that demand for live events has increased globally since the Covid-19 pandemic, and that the sector is less exposed to economic downturns than other forms of discretionary spending. * AI’s impact on the music industry has been “the biggest debate among music investors over the last year,” Laszczyk and Sheridan say.
But they believe that AI represents an opportunity for music labels and rights holders as streaming providers and tech companies use the technology to personalize recommendations, curate content, and turn passive listeners into active creators. Briefings Brainteaser: Returns Race Rising bond yields, energy disruptions, and shifting expectations for AI spending have buffeted markets this year. Which of these assets has returned the most in 2026, in local-currency terms?
A) TOPIX index of Japanese stocks B) Copper C) S&P 500 D) US high-yield bonds Check the answer here. ( ) Goldman Sachs in the News By clicking on these links, you will be redirected to external websites that Goldman Sachs does not own or operate. Goldman Sachs is not responsible for the products, services, or content provided on those sites. Please refer to each external website's terms, privacy, and security policies for details.
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