Goldman Sachs has updated its forecast for the S&P 500 index, elevating its year-end target to 5,200, which suggests an approximate 4% increase from the current figures. The adjustment is attributed to a brighter earnings forecast for companies within the index. Initially, the firm had set its 2024 year-end prediction for the index at 5,100, an increase from a previous forecast of 4,700 made in December.
S&P 500 Full-Year Outlook Raised to 5,200 at Goldman Sachs
It was influenced by diminishing inflation and the anticipation of the Federal Reserve reducing interest rates within the year. On a recent Friday, Goldman Sachs predicted an 8% rise in profits for S&P 500 firms, driven by a more optimistic outlook for the U.S. economy and enhanced profit margins among the largest corporations.
David Kostin, Goldman Sachs’ chief strategist, noted: “Anticipated robust global GDP growth, along with a weaker dollar, is expected to bolster earnings per share (EPS). However, we foresee lower interest rates and reduced oil prices as minor headwinds.”
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Kostin highlighted the significant role of mega-cap stocks, particularly those referred to as the Magnificent 7, in amplifying the overall profits for the S&P 500 in 2024. He pointed out that advancements in artificial intelligence and sustained consumer demand will likely drive revenue increases and margin improvements.
According to Kostin, these Magnificent Seven stocks are projected to experience the most substantial earnings growth within the S&P 500 sectors. Moreover, Kostin mentioned that operating margins across the broader index should improve, albeit somewhat.
The modest margin enhancement is expected as input costs, including wages, stabilise, coupled with solid sales performance and slight additional price deflation.
