Goldman Sachs strategists believe that if the economy stays strong and investors start putting money into recent underperformers, stock markets could continue to increase beyond their current record highs. They noted that the S&P 500’s recent rise to new highs has led to a high concentration of investor focus on a few key stocks, which they call the “Magnificent Seven.”
According to the strategists, there is a chance that the market could pull back, however, there is room for positive investor sentiment to grow stronger. If investors move more money from cash to riskier assets and into underperforming stocks, it could boost the market.
Stocks in the US and Europe have reached an all-time high this year, and investors are betting that the central banks might reduce interest rates because of this. Most of these gains are from big technology companies. In the US, the S&P 500 index is close to its highest level since 2009 compared to the equal-weighted index, which does not give much weight to the big tech companies.
What do the Goldman Sachs Strategists Say?
Some strategists like Michael Hartnett at Bank of America think there is more support for stocks due to the excitement being generated about artificial intelligence and confidence in economic growth.
However other strategists like Marko Kolanovic from JPMorgan Chase have different views and are worried about risks to stocks that might be similar to what happened in the 1970s with stagflation.
Generally, analysts followed by Bloomberg predict the S&P 500 will finish the year around 4897 points on average, which shows that there might be a decrease of about 4% from where it is right now.
Lifting of S&P 500 Target
Goldman Sachs strategists have increased their forecast for the S&P 500 Index for the second time, showing how optimistic Wall Street is about earnings. Goldman Sachs predicts that the S&P 500 will reach 5,200 by the end of this year, which has increased from the last forecast, which showed 5,100.
This increase is due to higher profit estimates, which are right now at a record high for the US stock index. The team, led by David Kostin, has seen that there was an increase of 3.9% from Friday’s close in the S&P 500.
Goldman Sachs’ S&P 500 target of 5,200 for 2024 has become one of the highest on Wall Street. Other strategists like Tom Lee of Fundstat Global Advisors and John Stoltzfus from Oppenheimer Asset Management have shared that they also believe that the year-end outlook will be the same.
The revised forecast by Goldman Sachs strategists about the S&P 500 shows that there is a positive outlook due to the increased profit estimates. David Kostin, who is leading the team, recently wrote on Friday to his clients that the major reason behind these revisions of the estimates is due to the increased profit estimates happening in the US currently.
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