Goldman Sachs Group Inc. strategists have boosted their year-end target for the S&P 500 Index for a third time, reflecting Wall Street’s optimistic outlook for earnings growth and the US economy.
The bank’s equity strategists led by David Kostin now see the US stock benchmark index finishing the year at 5,600, up from a 5,200 level they predicted in February. The new target implies a roughly 3% advance in the gauge from its Friday close.
Goldman’s upgraded target ties with that from UBS Group AG’s Jonathan Golub and BMO Capital Markets’ Brian Belski for the highest on Wall Street.
The upgrade in the target is “driven by milder-than-average negative earnings revisions and a higher fair value P/E multiple,” Kostin, the firm’s chief US equity strategist, wrote in a note to clients on Friday.
The upgrade comes one month after Kostin reiterated the firm’s 5,200 target, stating there was no further room for upside in the 500-member gauge through December. The firm’s strategists first introduced their 2024 target in November, before raising it in December and again in February. The 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 by the top five megacap technology stocks have offset the “typical pattern of negative revisions to consensus EPS estimates.” Kostin also raised the S&P 500’s price-earnings multiple he deems fair to 20.4 from 19.5.
Kostin gamed out several other scenarios in which stocks can run even higher than his new baseline forecast. If gains broaden out and lift the S&P 500 Equal Weight Index, the main, cap-weighted benchmark could rise another 9% to 5,900 before 2024 closes out. In his most optimistic case, if mega-cap “exceptionalism” persists, the gauge could soar to 6,300 by the end of the year.
Conversely, if earnings estimates prove too optimistic or recession fears resurface among investors, the S&P 500 could see a correction of about 13% and fall to 4,700.