February 18, 2024 at 9:10 PM GMT Updated on February 18, 2024 at 9:52 PM GMT
Just a few months after establishing a 2024 target for the S&P 500 Index, Goldman Sachs Group Inc. strategists have revised their forecast for a second time, prompted by the stock market’s recent surge past the significant 5,000 level.
David Kostin and his team attribute the revision to increased profit estimates, as stated in a note to clients dated Friday.
Kostin’s latest projection suggests the S&P 500 will climb to 5,200 by the year’s end, marking a 2% increase from the 5,100 level forecasted in mid-December. This new target implies a 3.9% rise from Friday’s closing figure.
Initially, in November, Kostin had anticipated the S&P 500 reaching 4,700 by the close of the year.
Goldman’s updated target of 5,200 for the S&P 500 in 2024 places it among the loftiest on Wall Street, aligning with the year-end outlooks of bullish analysts like Tom Lee of Fundstrat Global Advisors and Oppenheimer Asset Management chief strategist John Stoltzfus.
The firm’s analysts have revised their earnings-per-share forecast upward for the year, projecting $241 for 2024 and $256 for 2025, compared to the previously estimated $237 and $250, respectively. This adjustment reflects their anticipation of robust economic growth and increased profits in the information technology and communication-services sectors, home to five of the so-called Magnificent Seven stocks: Apple Inc., Microsoft Corp., Nvidia Corp., Alphabet Inc., and Meta Platforms Inc. The new projection exceeds the median top-down strategist forecast of $235.
Anticipating valuation multiples for both the S&P 500 and its equal-weight counterparts to remain near current levels — at 20 and 16 times earnings, respectively — the firm’s strategists emphasize that earnings growth will be the primary driver of further upside potential this year.
The S&P 500 Index has surged 4.9% year-to-date, driven by expectations of a more accommodative stance from the Federal Reserve and a wave of optimism surrounding artificial intelligence that buoyed technology stocks. According to data compiled by Bloomberg Intelligence, profits in the S&P 500 are projected to increase by 8.8% in 2024 compared to the previous year.
January saw the S&P 500 reaching its all-time high for the first time in two years, while the Nasdaq 100 achieved a similar milestone back in December after the Federal Reserve hinted at the end of aggressive rate hikes to combat inflation and hinted at potential rate cuts in 2024.
Bank of America Corp. and other Wall Street peers have hinted at the possibility of raising their year-end targets, suggesting that investors may not be sufficiently optimistic. The median S&P 500 target among nearly a dozen equity strategists tracked by Bloomberg sits at 4,950 as of mid-January.
Savita Subramanian of Bank of America highlighted on Bloomberg TV earlier this month that the main risk to the S&P 500 in the short term is upside potential, suggesting that their target of 5,000 may be too conservative.
Even Michael Wilson of Morgan Stanley, one of the more bearish voices on Wall Street, anticipates broader gains in the US equity market beyond the dominant big tech companies that have fueled the rally thus far. However, his 2024 target remains at 4,500, implying a roughly 10% decline from Friday’s closing price.