How High Can S&P 500 Go In 2024? Goldman Sachs Sets An Even Loftier Target

Goldman Sachs’ chief equity strategist, David Kostin, has revised the 2024’s year-end S&P 500 index target to 5100, marking a 7% increase from its current level, and up from the previous target of 4,700.

The catalyst behind this bullish revision? A Federal Reserve that’s showing a willingness to hit the rate-cut button.

Fed Fund Rate Forecast Shift: One of the key drivers behind Goldman’s upward revision of the S&P 500 target is the Federal Reserve’s change in tune. The bank’s economists have recently tweaked their Fed fund rate forecast, projecting rate cuts in March, May, and June of the upcoming year.

After the initial six months, Goldman Sachs anticipates a series of additional quarterly rate reductions, culminating in a policy rate between 4.0% and 4.25% by year-end. This move is expected to pave the way for a more accommodative monetary policy, which is expected to lower the cost of capital for U.S. firms.

Also Read: Federal Reserve Official Cautions Markets On Premature Interest Rate Cut Expectations

Global Disinflation Trend: Another piece of the puzzle is the global disinflation trend. Essentially, prices are rising at a slower pace worldwide, suggesting a shift towards a more normal inflation environment and an easier return to the 2% target. Reports on both Consumer Price Index (CPI) and Producer Price Index (PPI) have shown inflation inching closer to the Fed’s desired target.

Market Performance and Earnings Growth: Goldman Sachs is eyeing the potential for better-than-expected earnings growth in the S&P 500, estimating a 5% year-over-year increase in 2024. The U.S. bank has a top-down earnings-per-share (EPS) estimate of $237 for the S&P 500 in 2024, higher than the median Wall Street estimate of $230. “Financial conditions have loosened substantially since October and should boost economic activity and company earnings,” analysts wrote.

The S&P 500 Index, as tracked by the SPDR S&P 500 ETF Trust SPY, is currently trading at 4,736 points, up 22% year to date.

Over the past two months, the S&P 500 has surged by an eye-popping 13%, marking the third most robust two-month rally witnessed in the past two decades. This achievement stands only behind the remarkable rallies of March-April 2009, which signified the initial rebound following the Global Financial Crisis (GFC) bottom, and November-December 2020, when the development of Covid-19 vaccines ignited a bullish wave in stocks.

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