Goldman Sachs Wilson: Unfazed by Iran war fears, S&P 500 earnings are expected to grow 20% over the next year

Despite ongoing turmoil in the Middle East stirring the markets, some Wall Street strategists are turning their attention to the resilience of U.S. corporate earnings, viewing it as a key support for the stock market.

Morgan Stanley Chief Investment Officer and U.S. Equity Strategist Mike Wilson stated in a client report on March 23 that S&P 500 component earnings are expected to grow 20% over the next 12 months, a level that has historically only occurred when the economy is emerging from a recession.

He noted that the probability of rising oil prices ending this business cycle remains low. Meanwhile, Barclays strategists also raised their year-end target price and earnings forecasts for the S&P 500 this Tuesday, citing strong U.S. economic performance and impressive results from tech giants. This optimism partly explains the resilience of the S&P 500 amid escalating tensions in the Middle East.

Earnings Expectations Upward Revision Against the Odds

Analysts continue to raise earnings forecasts amid ongoing Middle East tensions.

Bloomberg Intelligence data shows that analysts expect first-quarter earnings for S&P 500 companies to increase 11.9% year-over-year, higher than the 10.9% forecast before the Iran conflict erupted. Strategist Wendy Soong summarized that earnings and revenue expectations for the next three quarters have been raised by 1.9% and 1.5%, respectively, partly due to the diminishing impact of tariffs.

Morgan Stanley CIO Mike Wilson pointed out a rare phenomenon: while S&P 500 stock prices are falling, corporate earnings expectations are being revised upward. Historical data indicates that whenever analysts raise earnings forecasts during a market decline, U.S. stocks tend to perform strongly afterward. This pattern provides a historical basis for investors willing to overlook short-term volatility.

Risks Cannot Be Ignored

Optimism is not without its risks.

JPMorgan Chase data shows that if oil prices remain at $110 per barrel for the rest of the year, earnings forecasts for S&P 500 companies could be cut by as much as 5 percentage points.

Garrett Melson, a portfolio strategist at Natixis Investment Managers Solutions, warned that during periods of major uncertainty, earnings expectations tend to lag. He pointed out that when Trump imposed large-scale tariffs in April, causing a stock market plunge, analysts also delayed lowering forecasts. “This is always the case when facing any uncertainty shock,” he said. “It takes time for the shock to transmit to earnings expectations.”

The upcoming first-quarter earnings season—kicking off with major banks reporting first—will be the first real test of analysts’ optimistic outlooks.

Geopolitical Situation Remains a Key Variable

In recent weeks, market pressure has continued to build, with escalating conflicts in the Middle East and no clear signs of cooling in the short term. Investors are hoping that Trump will push for de-escalation to prevent further declines in risk assets.

Brad Conger, Chief Investment Officer at Hirtle Callaghan, believes that the market’s sensitivity to political statements will eventually give way to focus on actual economic impacts. “At some point, the market will stop reacting to rhetoric and start focusing on economic impacts,” he said. “When companies begin to say they have to shift or cut capacity, or raise prices—that is, when they start reflecting real-world effects—Trump’s words will become less important.”

Risk Warnings and Disclaimers

Market risks exist; invest cautiously. This article does not constitute personal investment advice and does not consider individual users’ specific investment goals, financial situations, or needs. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular circumstances. Invest at your own risk.