Strategists at Goldman Sachs Group Inc. raised their year-end goal for the S&P 500 index for the third time, reflecting Wall Street’s optimistic outlook for earnings growth and the U.S. economy.
The bank’s equity strategists led by David Kostin now expect the US benchmark index to finish the 12 months at 5,600 points, above the 5,200 level they forecast in February. The latest goal means a rise within the index of about 3% from Friday’s closing price.
Goldman’s raised goal is the best on Wall Street, together with those of Jonathan Golub of UBS Group AG and Brian Belski of BMO Capital Markets.
The goal increase was “due to milder than average negative earnings revisions and a higher price-earnings ratio to fair value,” Kostin, the corporate’s chief U.S. equity strategist, wrote in a note to clients on Friday.
The upgrade comes a month after Kostin reiterated the corporate’s 5,200 goal, saying there was no further room for upside to the 500-member mark until December. The company’s strategists first set their 2024 goal in NovemberBefore educate it in December and again in FebruaryThe S&P 500 closed at 5,431.60 on Friday.
While the firm’s strategists maintained their earnings per share forecast for 2024 and 2025, they noted that robust earnings growth within the five largest megacap technology stocks offset the “typical pattern of negative revisions to consensus earnings per share estimates.” Kostin also raised the S&P 500’s price-to-earnings ratio, which he considers fair, to twenty.4 from 19.5.
Kostin played out several other scenarios wherein stocks could rise even higher than his latest base forecast. If earnings extend and lift the S&P 500 Equal Weight Index, the primary cap-weighted index could rise one other 9% to five,900 by the tip of 2024. In his most optimistic case, the index could rise to six,300 by year-end if mega-cap “exceptionalism” continues.
However, if earnings forecasts prove to be too optimistic or recession fears resurface amongst investors, the S&P 500 could experience a correction of around 13 percent and fall to 4,700 points.
