The S&P 500 is up roughly 10% in 2026. Global earnings are being revised higher. Corporate capital spending is at levels not seen in decades.
Goldman Sachs published a global strategy note on May 19 that agrees with all of that. And then it explains why the rally may be more fragile than it looks.
Why equities are rising and what is doing most of the work
Goldman’s analysts Peter Oppenheimer, Sharon Bell, Guillaume Jaisson, and Giovanni Ferrannini published their note titled “Momentum risks yielding to bonds.” Nominal global GDP growth is running at 5.9% in 2026, up from 4.7% in 2025, with earnings revisions positive across every S&P 500 sector.
The earnings picture has been unusually strong. Bottom-up consensus estimates for S&P 500 EPS in both 2026 and 2027 have each been revised upward by 8 percentage points so far this year. In most years, analyst estimates drift lower. In 2026, the opposite is happening.
Technology and energy have been the two main drivers. AI infrastructure stocks have seen cumulative EPS estimate increases of 59% since January 2025, according to Goldman Sachs. The S&P 500 overall is up 9% over the same period. The S&P 500 excluding AI infrastructure is up just 1%.
The concentration problem Goldman says investors are underestimating
The S&P 500 has returned approximately 10% year-to-date in 2026. Technology, media, and telecom have accounted for 85% of that return. That concentration creates fragility that broad index performance obscures.
More Wall Street:
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Goldman says the momentum factor has become unusually elevated, driven by technology and commodity-related sectors. When momentum concentrates that sharply, weakness in the broad market gets masked by strength at the top. Investors chasing the same trades tend to produce sharper reversals when conditions shift.
Investor sentiment has followed the concentration higher.
As I wrote previously, Goldman’s Risk Appetite Indicator recently rose above 1.1, placing it in the 99th percentile since 1991 and at its highest reading since 2021. US retail trading volumes have risen 28% since mid-April. A basket of retail-favorite stocks has rallied 29% over the same period.
Why the bond market is now the biggest risk to equities
The most significant warning in Goldman’s note is about the relationship between stocks and yields. The correlation between equities and bond yields has turned negative, according to Seeking Alpha.
For most of the past decade, rising yields reflected better growth, which also supported stocks. Now, rising yields are compressing equity risk premia and threatening valuations instead.
Goldman’s data shows that sharp moves in bond yields have historically coincided with negative equity returns. US 30-year yields are now above 5% for the first time since 2007, Seeking Alpha confirmed. If oil disruptions persist into the second half of 2026 and inflation expectations rise further, Goldman says there is a real risk of a speed bump for markets.
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How the capex boom is reshaping winners and losers inside markets
S&P 500 companies reported year-over-year capex growth of 38% in Q1 2026, compared to just 1% growth in buybacks. Consensus estimates for the top five hyperscalers’ capital expenditure have risen by approximately $80 billion to $755 billion this year, 80% higher than a year ago, according to Fortune.
That capex surge is reshaping which companies win. Asset-heavy companies now trade at a 30% price-to-earnings premium to asset-light companies in the US. The historical median for that relationship is zero. Hardware stocks have dramatically outperformed software as agentic AI fears erode software terminal values.
Key figures from Goldman’s May 19 global strategy note:
- Nominal global GDP growth: 5.9% in 2026, up from 4.7% in 2025
- S&P 500 EPS revisions: 2026 and 2027 estimates each revised up 8pp; revisions positive across every sector in the past month
- AI infrastructure EPS: up 59% since January 2025; S&P 500 overall up 9%; S&P 500 ex-AI infrastructure up just 1%
- Market concentration: TMT accounts for 85% of the S&P 500’s 10% YTD return; RAI at 99th percentile since 1991
- Capex shift: S&P 500 capex +38% YoY in Q1 2026 vs +1% for buybacks; top 5 hyperscaler capex at $755 billion, up $80 billion this year
- Asset-heavy valuation: 30% PE premium to asset-light stocks in the US, versus historical median of 0%
- Bond yields: US 30-year yields above 5% for first time since 2007; equity-bond yield correlation turned negative
Source: Goldman’s May 19 note.
What Goldman says investors should do now
Goldman’s conclusion is not bearish. The note does not call for selling equities or reducing risk. For the first time in many years, the bank says there are emerging pockets of value inside growth and pockets of growth inside value, creating genuine opportunities for investors willing to look beyond the index.
The risks it is flagging are specific: a deterioration in the growth-inflation mix, a sharp move higher in bond yields, and any further oil-driven inflation shock.
The rally is real. The earnings behind it are real. But concentration, elevated sentiment, and a changed bond market create a backdrop where the next macro surprise could matter significantly more than it would have in a more broadly supported market environment.
Related: Goldman Sachs doubles down on stock market message for 2026
