2027 US Equity Outlook: Earnings Sustainability as Core Thesis

US equities rose for a fourth straight year on earnings, but uncertainty over the earnings outlook also compressed valuations and increased volatility. Earnings are likely the central question for the 2027 outlook. We forecast S&P 500 EPS growth of c. 14.7%/16.7% in 2027E/2028E, below the FactSet consensus of 16.09%/17.42%, implying EPS of USD415.3/484.6, 1.2%/1.9% below consensus. Our below-consensus forecasts reflect bottom-up work showing that, of four swing factors — depreciation, off-balance-sheet leases, oil prices and interest — higher interest from debt maturities rolling over and off-balance-sheet lease costs may not be fully priced in. On valuation, a two-stage discount model focuses on the risk-free rate, the equity risk premium and expected long-term earnings growth. In our base case, we assume a risk-free rate of 4.8% at end-2027, an ERP rising slightly to 5.0%, and long-term growth falling from 12.4% to c. 10%, with trailing P/E declining from 21.9x to c. 19.7x. S&P 500 u