Goldman Sachs Group has revised its year-end target for the S&P 500 Index to 5,600, up from the previous 5,200. The adjustment is attributed to the robust earnings growth of five major U.S. tech companies and an increased fair value price-to-earnings ratio.
What Happened: The revised target reflects a 3.1% increase from the index’s most recent close of 5,431.60, reported Reuters. The brokerage firm anticipates a steady real yield by year-end and strong earnings growth to maintain a 15x P/E for the equal-weight S&P 500 Index.
Microsoft Corp MSFT, NVIDIA Corp NVDA, Google’s parent company Alphabet Inc GOOG GOOGL, Amazon.com AMZN, and Meta Platforms META have collectively surged by 45% and now represent a quarter of the S&P 500 equity cap, as stated in a brokerage note released after Friday’s market close.
“The drivers of the rally include upward revisions to consensus 2024 earnings estimates for these same tech companies, and valuation expansion stemming from increased investor enthusiasm about artificial intelligence,” said analysts at Goldman Sachs.
Goldman Sachs analysts highlighted the U.S. election as a significant risk to the S&P 500 level, with the election period typically seeing increased index volatility. However, post-election, volatility usually decreases, and the S&P 500 index tends to recover to an even higher level.
Why It Matters: This upward revision comes at a time when the stock market is experiencing a bullish trend. Earlier this month, Goldman Sachs had forecasted a flat return for the S&P 500 for the rest of the year, indicating that the stock market rally for 2024 had reached its peak. This recent revision suggests a more optimistic outlook for the S&P 500.
Goldman Sachs’ revision aligns with the predictions of other market analysts. For instance, Julian Emanuel, the chief equity and quantitative strategist at Evercore ISI, forecasted a 26% gain for the S&P 500 this year, with a year-end price target of 6,000. This suggests a continued bullish trend for the stock market in 2024.
However, not all analysts share this bullish outlook. In a recent interview, economist Harry Dent warned of a potential “crash of a lifetime,” predicting an 86% plummet for the S&P 500.
According to data from Benzinga Pro, the SPDR S&P 500 ETF Trust SPY, which tracks the S&P 500 Index, closed Friday’s session at a record high of 542.78, marking a 0.06% increase.
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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote
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