Goldman Sachs: Q2 EPS up 14%, earnings recovery spreading

TechFlow reports that, according to Chaoxiang Research, a Goldman Sachs research report dated August 31, 2026, points out that earnings per share for median S&P 500 companies grew by 14% in the second quarter, with the profitability recovery spreading from AI infrastructure to broader sectors. Excluding AI infrastructure companies, the earnings growth rate for the remaining stocks also hit a new high in this cycle. Year-to-date, the S&P 500 has risen by 12%, while its forward P/E ratio remains at 20x. Valuations have not expanded; earnings growth has absorbed the stock price gains. In August, the S&P 500 increased approximately 2.5%, entirely driven by the first two trading days of the month.

The Federal Reserve held rates steady in July. Warsh's hawkish debut at Jackson Hole pushed the probability of a September rate hike above 50%. Goldman Sachs expects core CPI and PCE to rise around 0.2% month-over-month in August, indicating that a rate hike will not occur. The Treasury increased the scale of its repo purchases. Should the Strait of Hormuz close for six months, Goldman Sachs believes oil prices may have already peaked, with European natural gas facing considerable upside risks. Inflation has remained elevated for five consecutive years, but Goldman Sachs considers that inflation expectations do not yet face de-anchoring risks. September data on ISM manufacturing, nonfarm payrolls, CPI, and PCE will provide further directional guidance.