Goldman Sachs Raises S&P 500 Target on Upbeat Earnings Outlook

(Times Of Update) — Strategists at Goldman Sachs Group Inc. raised their year-end target for the S&P 500 index for the third time, reflecting Wall Street’s upbeat outlook for earnings growth and the U.S. economy.

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The bank’s equity strategists, led by David Kostin, now expect the U.S. equity benchmark to end the year at 5,600, up from the 5,200 level they predicted in February. The new target implies an advance of around 3% for the indicator compared to its close on Friday.

Goldman’s upgraded target ties with UBS Group AG’s Jonathan Golub and BMO Capital Markets’ Brian Belski for Wall Street’s highest.

The target increase is “driven by lighter-than-average negative earnings revisions and a higher fair value P/E multiple,” Kostin, the firm’s chief U.S. equity strategist, wrote in a note to customers on Friday.

The upgrade comes a month after Kostin reiterated the company’s 5,200 member goal, saying there was no room for growth in the 500-member gauge until December. The firm’s strategists first presented their 2024 target in November, before raising it in December and then again in February. The S&P 500 closed at 5,431.60 on Friday.

Although the company’s strategists maintained their earnings per share forecasts for 2024 and 2025, they noted that strong earnings growth from the five largest mega-cap technology stocks offset the “typical pattern of negative revisions to consensus estimates of the BPA”. Kostin also raised the price-to-earnings multiple of the S&P 500, which he considers fair, from 19.5 to 20.4.

Kostin imagined several other scenarios in which stocks could outperform his new baseline forecast even further. If gains widen and send the S&P 500 Equal Weight Index higher, the main cap-weighted benchmark could rise another 9% to 5,900 before the close of 2024. In its most optimistic case , if the “exceptionalism” of mega-caps persists, the gauge could climb 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 index could see a correction of about 13% and fall to 4,700.

–With the help of Elena Popina.

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