Goldman Sachs increases year-end target for S&P 500 to 5,600

Goldman Sachs Raises 2024 Year-End Target for S&P 500 Index

Goldman Sachs recently announced an increase in its 2024 year-end target for the S&P 500 Index to 5,600 from 5,200, citing the impressive earnings growth of five mega-cap U.S. tech stocks and a higher fair value price-to-earnings ratio multiple. This adjustment comes after Microsoft, Nvidia, Google, Amazon.com, and Meta Platforms collectively surged by 45% and now make up 25% of the S&P 500 equity cap.

What sets these tech companies apart is not just their performance but also the increase in investor enthusiasm about artificial intelligence (AI). This has led to both upward revisions in consensus 2024 earnings estimates for these companies and a valuation expansion. As a result, the upgraded target represents a potential 3.1% upside from the index’s most recent close at 5,431.60.

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Looking ahead, Goldman Sachs predicts relatively stable real yields by year-end, with strong earnings growth supporting a 15x P/E for the equal-weight S&P 500 Index. However, analysts caution that the upcoming U.S. presidential election could pose a risk to the S&P 500 level, falling between their 3-month and year-end forecast horizons. The United States is scheduled to hold its next presidential election in November of this year.

Historically, index volatility tends to increase in the lead-up to elections during election years. However, following the election, volatility typically subsides, and the S&P 500 Index tends to rebound to even higher levels. This trend is something investors should keep in mind as they navigate the current market landscape.

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