(Bloomberg) — Strategists at Goldman Sachs Group boosted their year-end target for the Standard & Poor's 500 Index for the third time, reflecting Wall Street's upbeat expectations for earnings growth and the U.S. economy.
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The bank's equity strategists, led by David Kostin, now expect the benchmark US stock index to end the year at 5,600, up from the 5,200 they expected in February. The new target indicates an advance of about 3% in the metric compared to Friday's close.
Goldman upgraded its target relationships with Jonathan Golub of UBS Group AG and Brian Belsky of BMO Capital Markets to the highest level on Wall Street.
The upgrade at Target is “driven by below-average negative earnings revisions and higher fair value multiples,” Kostin, the firm's chief U.S. equity strategist, wrote in a note to clients on Friday.
The upgrade comes one month after Costin confirmed the company's target of 5,200 members, stating there was no further room to rise on the 500-member scale through December. Strategists at the company first presented 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 company's strategists maintained their EPS forecasts for 2024 and 2025, they noted that strong earnings growth by the top five largest technology stocks offset “the typical pattern of negative revisions to consensus EPS estimates.” Kostin also raised the S&P 500's price-earnings multiple, which he considers fair, to 20.4 from 19.5.
Kostin laid out several other scenarios in which stocks could rise above his new fundamental forecast. If gains expand and lift the S&P 500 to equal weight, the weighted headline index could rise another 9% to 5,900 before the close of 2024. In its most optimistic case, if the huge “exceptions” continue, the gauge could rise 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.
–With the help of Elena Bubina.
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