(Bloomberg) — Just months after setting a 2024 target for the S&P 500, Goldman Sachs Group Inc. strategists raise their forecasts for a second time, reflecting Wall Street’s optimistic earnings outlook. Ta.
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“Increased earnings expectations are the driving force behind the revision,” David Kostin and his team said in a note to clients dated Friday. The 12-month earnings outlook for U.S. stock indexes is at a record high after bottoming out a year ago.
Kostin now sees the S&P 500 index rising to 5,200 by the end of this year, representing a 3.9% increase from Friday’s close and raising his forecast from the 5,100 level he expected in mid-December.
He originally predicted in November that the S&P 500 index would reach 4,700 by the end of this year, but already this month the index passed the key milestone of 5,000.
Goldman’s 2024 S&P 500 price target of 5,200 is currently the highest on Wall Street, with similar year-end forecasts from Fundstrat Global Advisors’ Tom Lee and Oppenheimer Asset Management’s chief strategist. , has joined the ranks of bulls such as John Stoltzfus.
The company’s strategists raised their earnings per share forecast for this year to $241 and $256 in 2025, from $237 and $250. This reflects expectations for “stronger economic growth and higher profits” for the information technology and communications services sector, which includes five of the so-called Magnificent Seven stocks such as Apple Inc., Microsoft Inc., Nvidia Inc. and Alphabet Inc. are doing.and Meta Platforms Inc.
The new forecast is above the median top-down strategist forecast of $235.
The ongoing earnings season has so far reaffirmed what bulls have been hoping for all along: solid earnings growth. Of the nearly 84% of S&P 500 market capitalizations reported so far, 79% of companies beat expectations. Investors broadly rewarded these stocks, outperforming the benchmark by a median of 0.7 percentage points on earnings day, according to data compiled by Bloomberg Intelligence.
The reporting period for The Magnificent Seven varied. Meta, Amazon and Microsoft beat expectations, while Tesla disappointed and Apple showed weakness in China. Investors are mainly looking to Nvidia’s results later this week to see if the company’s stock price can live up to the lofty expectations set by the artificial intelligence boom.
Goldman strategists expect valuation multiples for the S&P 500 and its equal-weighted index to remain close to current levels of 20x and 16x P/E, respectively, noting that “earnings growth will lead to higher upside this year. “This will be the main driving force for maintaining this.”
After a strong 2023, the S&P 500 has risen 4.9% this year as hopes for a dovish policy shift by the Federal Reserve and optimism in artificial intelligence boosted tech stocks. The 500-member group’s profits are expected to rise 8.8% from a year ago in 2024, according to data compiled by Bloomberg Intelligence.
The S&P 500 hit a new two-year high in January, and the Nasdaq 100 hit a new high in December for the first time in a similar period after the Fed signaled that its aggressive rate hikes to curb inflation were likely over. The highest value was recorded. Reductions are being considered for 2024.
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Wall Street peers such as Bank of America have said they may also raise their year-end targets because they don’t think investors are optimistic enough. The median target for the S&P 500 index by more than a dozen equity strategists tracked by Bloomberg currently stands at 4,950 through mid-January.
“The biggest risk to the S&P 500 in the near term is upside,” Bank of America’s Savita Subramanian told Bloomberg TV earlier this month. She said: “Our target of 5,000 people is probably too low in the short term.”
Even Morgan Stanley’s Michael Wilson, one of Wall Street’s most prominent bears, believes that the U.S. stock market rally is currently getting less love than the big tech companies that have dominated previous bull markets. We expect it to expand into fields where it is not currently available. His 2024 target remains at 4,500, implying a decline of about 10% from Friday’s close.
–With assistance from Elena Popina.
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