Goldman Sachs Raises S&P 500 Target to End 2023, Citing Easing Fed Policy Investment bank Goldman Sachs has upgraded its year-end target for the S&P 500 index, citing expectations of a less aggressive Federal Reserve policy stance. In a research note published on Tuesday, Goldman Sachs strategists led by David Kostin raised their target for the S&P 500 to 4,300 by the end of 2023, a 7.4% increase from current levels. The previous target was 4,000. The upward revision was primarily driven by the strategists’ belief that the Fed will pivot from its current hawkish stance and begin cutting interest rates later this year. They forecast three rate cuts in the second half of 2023. “We see a more benign backdrop for risk assets going forward, with the Fed likely to pause hikes and pivot to cuts later this year,” wrote Kostin. The less aggressive Fed policy is expected to support earnings growth and reduce the risk premium for equities. Goldman Sachs now estimates S&P 500 earnings per share (EPS) to grow by 6% in 2023, up from a previous estimate of 4%. “The combination of a slower pace of earnings growth and a lower risk premium still leaves room for P/E multiple expansion,” added Kostin. The strategists also noted that the S&P 500 is currently trading at a forward P/E of 17.5x, which is below its long-term average of 18.6x. They believe that the index could continue to trade at a premium to its historical valuation given the still-low interest rate environment. Despite the bullish outlook, Goldman Sachs cautioned that risks remain, including the potential for a deeper recession or a more hawkish Fed stance than expected.Goldman Sachs has raised its year-end price target for the S&P 500 to 5600, citing strong earnings growth and increased fair value. The bank expects the index to end the year 3% higher than Friday’s close.
Goldman Sachs has raised its year-end price target for the S&P 500 to 5600, citing strong earnings growth and increased fair value. The bank expects the index to end the year 3% higher than Friday’s close. Five stocks have been responsible for 60% of the S&P 500’s total year-to-date return: Microsoft, Nvidia, Alphabet’s Google, Amazon, and Meta Platforms. These stocks have collectively risen 45% and now comprise 25% of the S&P 500’s stock capitalization. Driving forces behind the rally include upward revisions to 2024 consensus expectations for the same technology companies, and a rise in valuation due to increased investor enthusiasm about artificial intelligence. Analysts expect the five companies mentioned above to report first-quarter 2024 EPS of 84% versus 5% for the typical S&P 500 stock, prompting them to raise their 2024 EPS estimates for these five tech stocks by 38%. Goldman expects the current bottom-up consensus EPS estimate for 2025 to be cut by just 2% through year-end, half the average historical revision. The bank’s valuation model suggests the S&P 500’s price-to-earnings will be 20.4x by year-end, 3% below the current multiple of 21.1x. The election remains a key risk to the S&P 500 level, but historically, index volatility has increased during pre-election years and the S&P 500 index has fallen 4% between late October and early November. After the elections, volatility tends to decrease and the index returns to even higher levels.
Goldman Sachs has raised its year-end target for the S&P 500 index to 4,300, citing a number of factors that are expected to support continued gains in the stock market. In a note to clients, Goldman’s chief U.S. equity strategist David Kostin said that the firm’s economists now expect GDP growth to average 3.5% over the next three quarters, up from a previous forecast of 3.1%. Kostin also cited a number of other factors that are expected to support the stock market, including: * Continued low interest rates * Strong corporate earnings growth * A weaker U.S. dollar * Improving global economic growth Kostin said that the firm’s new target implies a total return of 11% for the S&P 500 over the next 12 months. He also said that the firm remains overweight on cyclical sectors, such as financials and industrials, and underweight on defensive sectors, such as utilities and consumer staples.
