Goldman Sachs Group Inc. has revised its forecast for the S&P 500 Index upward for the second time in just a few months, citing robust profit expansion. The milestone of the stock market surpassing the significant 5,000 mark this month prompted the revision, with Goldman now projecting the index to reach 5,200 by the end of the year.
David Kostin, leading a team of strategists at Goldman Sachs, highlighted that the increase in profit estimates is the primary driver behind the upward revision. This latest forecast represents a 2% increase from the previous projection of 5,100 set in mid-December. Initially, in November, Kostin had forecasted the S&P 500 to reach 4,700 by the end of the year.
Goldman’s revised target of 5,200 for the S&P 500 in 2024 places it among the highest forecasts on Wall Street, aligning with bullish outlooks from other prominent strategists such as Tom Lee of Fundstrat Global Advisors and John Stoltzfus, chief strategist at Oppenheimer Asset Management.
The firm’s strategists also upgraded their earnings-per-share forecast for the year, anticipating $241 for 2024 and $256 for 2025, up from $237 and $250, respectively. This reflects their expectation of stronger economic growth and higher profits, particularly in the information technology and communication-services sectors, which include major companies like Apple Inc., Microsoft Corp., Nvidia Corp., Alphabet Inc., and Meta Platforms Inc.
Goldman Sachs expects valuation multiples for both the S&P 500 and its equal-weight counterparts to remain close to current levels, with earnings growth being the primary driver of further upside this year. The S&P 500 has already gained 4.9% year-to-date, driven by expectations of a more accommodative policy stance by the Federal Reserve and optimism surrounding technology stocks amid advancements in artificial intelligence.
While Goldman Sachs is bullish on the market outlook, other Wall Street peers like Bank of America Corp. are also considering raising their year-end targets, suggesting that current investor sentiment might be overly pessimistic. Savita Subramanian of Bank of America highlighted that the biggest risk to the S&P 500 in the near term is upside potential, indicating that their target of 5,000 may be too conservative.
Even with cautious voices like Michael Wilson of Morgan Stanley, who maintains a more bearish stance with a 2024 target of 4,500, there is an expectation of broader market gains beyond the tech sector. Wilson’s target implies a roughly 10% decline from the current market levels, highlighting the diversity of opinions within the investment community.
