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Goldman Ups S&P 500 Target for the Third Time, Says 6,300 is Possible

June 17, 2024
minute read

Could the third time be the charm for Goldman Sachs? The bank’s strategists have raised their S&P 500 target again, now aligning with some of Wall Street’s most optimistic predictions.

Goldman Sachs now projects the S&P 500 to end 2024 at 5,600, up from their previous target of 5,200. This adjustment is attributed to “milder-than-average negative earnings revisions and a higher fair value price/earnings multiple,” according to a note from a team of strategists led by David Kostin released late Friday.

This marks Goldman’s third target increase for the S&P 500 in recent months, following revisions in February and December 2023, not long after they announced their outlook for this year.

A bullish year for stocks has prompted most strategists, who had anticipated below-average returns after a strong 2023, to revise their forecasts upwards throughout 2024. The S&P 500 recently logged its 29th record close.

Goldman’s new target puts it in line with BMO Capital Market’s Brian Belski, who raised his target to 5,600 in May, positioning himself as Wall Street’s most optimistic until Evercore strategists raised their target to 6,000 over the weekend.

Kostin and his team attribute the S&P 500’s over 13% gain this year to substantial contributions from five stocks—Microsoft, Nvidia, Alphabet, Amazon, and Meta—which have collectively risen 45% and constitute 25% of the index’s market cap. These five companies have seen earnings per share growth of 84%, compared to 5% for the average stock, driven by enthusiasm for artificial intelligence.

The strategists now expect the current bottom-up consensus 2025 earnings per share estimate of $279 to be revised downwa

rd by just 2% through year-end, half the average historical revision. However, they are maintaining their 2024 and 2025 forecasts of $241 (an 8% gain) and $256 (a 6% increase), believing that consensus margin estimates for next year are overly optimistic.

Goldman’s valuation model predicts the S&P 500’s P/E ratio will be 20.4 times by year-end, slightly below the current multiple of 21.1 times.

Goldman also outlined several alternative index scenarios. In a “catch-up” scenario, the S&P 500 could finish the year at 5,900, with the equal-weight index expanding to 18 times, matching a pre-pandemic high. Conversely, a “catch-down” scenario could see the index ending the year at 4,700 if current analyst estimates prove overly optimistic and AI-driven expectations create a high bar.

A third scenario, termed “continued megacap exceptionalism,” could result in the index reaching 6,300. A fourth scenario suggests a potential finish at 4,800 if investors grow concerned about the economy and price in a higher risk of recession.

Kostin noted that although Goldman’s economists forecast above-consensus economic growth, further weak growth data could reignite slowdown fears, pushing the S&P 500 P/E multiple down to 18 times. In such a scenario, investors might gravitate toward the perceived safety of the largest stocks, increasing the aggregate versus equal-weight premium and limiting some downside.

This downside could also be mitigated by the Federal Reserve, which would have more room to cut interest rates if economic data worsened, the strategists added.

Finally, Kostin and his team highlighted that the U.S. election remains a significant risk for stocks. Historically, during election years, the index has dropped 4% between late October and early November but tends to rebound strongly post-election.

Cathy Hills
Associate Editor
Eric Ng
John Liu
Editorial Board
Bryan Curtis
Adan Harris
Managing Editor
Cathy Hills
Associate Editor

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