Goldman Sachs forecasts stable growth, warns on AI trade in 2027 outlook

The asset-allocation report, titled "Growing Pains," was written by macro strategists Dominic Wilson and Kamakshya Trivedi. It pairs with Jan Hatzius' economic view, "Macro Outlook 2027: Steady Baseline, Downside Risks." The bank sees global GDP growth of 2.8% in 2027, slightly above the 2.7% estimated for 2026.

Regional Growth Projections

The regional picture is uneven, with US growth projected at 2.4%, China at 4.5%, and the euro area at a sluggish 0.9%. Two forces are expected to drive this growth: cheaper energy and continued AI spending.

Goldman forecasts Brent crude falling to $78 per barrel by the end of 2027. AI investment is projected to climb from $1.1 trillion in 2026 to $1.8 trillion in 2027, adding approximately 0.4 percentage points to overall GDP growth.

Market Recommendations

For inflation, Goldman expects US core PCE to ease to 2.4% by the end of 2027, with potential Fed rate hikes in December 2026 and March 2027. The bank sees the S&P 500 potentially rising 14% to a target of 8,700, though earnings growth is expected to slow sharply from 36% to 11%.

Key Risks to Monitor

Goldman identifies three major downside risks: an escalation involving Iran that could disrupt energy supplies, widening fiscal deficits putting pressure on bond markets, and AI investment peaking earlier than expected. The bank tied Nvidia's 14% share drop to personal controversies surrounding Jensen Huang's resignation.

For equity investors, the gap between a 14% index target and earnings growth falling from 36% to 11% represents the key tension. Investors should watch for signs of slowing AI capital spending, oil prices moving away from the $78 Brent forecast, Fed decisions, and any further fallout at Nvidia.