Goldman Sachs warns S&P 500 market breadth hits lowest since dot-com bubble

The S&P 500 is having a perfectly fine year on paper. It’s up 14% in 2026 and sitting within roughly 1% of its August peak. But underneath that glossy surface, something uncomfortable is happening: the typical stock in the index is getting quietly destroyed.

Goldman Sachs strategists, led by Ben Snider, flagged in a late September client note that market breadth in the S&P 500 has narrowed to levels not seen since the dot-com bubble. The median stock in the index is trading 16% below its 52-week high, even as the headline number looks healthy.

The numbers paint a stark picture

Goldman’s U.S. Equity Sentiment Indicator has fallen to -0.9, matching the low watermark hit back in March 2026.

The forward price-to-earnings ratio for the S&P 500 has slid from 22x to 19x, landing right on the ten-year average.

Fewer than half of S&P 500 constituents are currently trading above their 200-day moving averages. Historical analysis shows that instances of the index nearing all-time highs while sub-50% of stocks sit above their 200-day averages have been rare since 1990. The handful of times it has happened clustered almost entirely between 1998 and 2000.

A warning months in the making

This isn’t the first time Goldman has raised the alarm in 2026. Back in May, the firm’s analysts noted a median shortfall of around 13% among S&P 500 stocks relative to their highs. By June, they observed that breadth had reached the 94th percentile compared to historical data, a reading that still fell below the extremes seen in 2000 but was firmly in cautionary territory.

Rising interest rates and growing skepticism about the durability of AI-driven profits are the twin forces squeezing the broader market.

What this means for portfolios

Goldman’s note did offer a sliver of optimism. The strategists suggested that a reduction in macroeconomic uncertainty could spark broader market advances and give underperforming stocks room to recover.

The forward P/E compression from 22x to 19x tells us that the market is already starting to price in some of this risk. The sentiment indicator at -0.9 suggests institutional investors are increasingly positioning for the latter.