U.S. equities trading near historic peaks signal that investors believe weakness in the labor market may prove fleeting, Goldman Sachs analysts said Monday.
In a client note, the bank pointed out that stocks have continued to climb even as several recent data releases suggest the American job market is softening and overall growth could be losing momentum.
Since April — when President Donald Trump’s rollout of “reciprocal” tariffs initially triggered a sharp selloff — the S&P 500 has surged 32% and registered 21 new record closes, the fastest pace since 2021. The Dow Jones Industrial Average and Nasdaq Composite have also notched fresh highs in recent weeks.
However, Goldman strategists led by David Kostin cautioned that some investors are uneasy about the gap between buoyant valuations and slowing labor trends.
“Equities appear to be looking through the temporary economic slowdown and pricing reacceleration in 2026,” the analysts wrote, noting that a weaker job market has “open[ed] the door” for the Federal Reserve to cut interest rates this week. According to CME’s FedWatch Tool, markets now see about a 95% chance of a 25 basis point reduction and a small 5% probability of a larger half-point cut.
Goldman also suggested that softer employment conditions could ultimately boost corporate margins by curbing wage pressures. The team estimated that a 100-basis-point shift in labor cost growth translates into a 0.7% swing in S&P 500 earnings per share, assuming other factors remain unchanged.
They added that companies with labor-heavy models, slim margins, and significant artificial intelligence exposure stand to gain the most in earnings per share. Among those highlighted were Accenture, Aon, Brown & Brown, Dollar Tree, EPAM Systems, Marsh & McLennan, and News Corp.
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