By
Steve Muchoki
April 16th, 2024
Goldman Sachs strategists have set a new price target for the S&P 500. Up by 20% from its earlier target, the revised target is pegged at 3,600.
The strategy team led by David Kostin, an analyst at U.S. investment banking firm Goldman Sachs (NYSE: GS) has lifted his year-end price target for the S&P 500 Index (INDEXSP: INX). In his revised call, Kostin raised his price target from 3,000 to 3,600 which is an increase of about 20%.
The bullish call comes off following the rally by the S&P 500 in recent weeks. Today, the S&P 500 is up by about 51% from its March lows which a promising outlook to outpace its February highs. The company has been showing impressive upticks as it nearly hit a new all-time high last week. It is currently pegged at 3,372.85. The strategists expect the yield on the 10-year Treasury to rise, from 0.7% now to 1.1% by the end of the year.
Kostin wrote in a note Friday:
“As the last few months have demonstrated, equity prices depend on not just the expected future stream of earnings but the rate at which those earnings are discounted to present value. Looking forward, a falling equity risk premium will outweigh a rise in bond yields, and combined with our above-consensus EPS forecast, will lift the S&P 500 Index to 3,600 by year-end”.
From the foregoing, they expect the risk premium for U.S. equities to decline from 6.3% now to 5.7% by the end of the year, and down to 5.2% by the end of the first half of 2021. Overall, the strategists suppose that the recent performance of the S&P 500 was influenced by the large cash injections in coronavirus aids companies within the index benefitted from.
The revenue data from the previous quarter rolled out by companies in previous weeks gives an improved marker for a resilient economy and market, a factor that may make investors stay bullish on the stocks.
The key tech components of the S&P 500 particularly the big 4 tech firms in the U.S. including Apple Inc (NASDAQ: AAPL), Amazon.com Inc (NASDAQ: AMZN), Facebook Inc (NASDAQ: FB) and Google LLC (NASDAQ: GOOGL) have all shown massive rallies with future potential growth to drive the S&P 500 towards the set target.
Additionally, the positive vibe around the early discovery of a COVID-19 vaccine has stirred an increased performance in some stocks the index is comprised of further justifying the new bullish call.
David Kostin however, pointed out that the GS price target on the S&P 500 may be impacted by the United States election.
Other Analysts with Bullish Calls for as Goldman Sachs for the S&P 500
As analysts on Wall Street measure and forecasts stock performances using open analysis of market data, few have preceded Goldman Sachs in giving the S&P 500 a new year-end target.
JPMorgan Chase & Co (NYSE: JPM) strategists led by Mislav Matejka on Monday also reiterated their preference for U.S. equities, telling clients to stay bullish despite the strong gains and upcoming U.S. election risks.
The major reason why Matejka’s team remains positive is due to the fact that U.S. sectoral exposure to growth and defensive stocks will help it outperform other developed markets, and that the nation’s profit growth margin will likely beat that of Europe.
In all, as the S&P 500 is an index of the performance of 500 large stock companies, a boosted overall performance fueled by a fully recover economy will help achieve this price target with a possibility of more gains.