Goldman Sachs is optimistic about stock market prospects beyond the current market volatility and anticipates favorable conditions through the end of the year and into the future. The bank increased its 2024 S&P 500 target to 6,000 from 5,600, matching Evercore ISI’s estimate, which is the second-highest on Wall Street according to CNBC Pro’s Market Strategy Survey. This new target suggests a potential gain of 4.3% from the most recent market close. Additionally, Goldman Sachs raised its 12-month S&P 500 target to 6,300 from 6,000, forecasting an increase of 9.5% for the broader market index.
This outlook was shared amid a backdrop of declining stock futures, as traders remained cautious about rising rates and oil prices. However, Goldman Sachs believes that earnings growth will drive market improvements before the year’s end. David Kostin, the chief U.S. equity strategist, expressed that the macroeconomic outlook remains steady, anticipating S&P 500 earnings growth of 8% in 2024 and 11% in 2025. Kostin highlighted the potential for modest margin expansion as price increases outpace growth in input costs. He also pointed to factors like the moderation of unique company charges this year and a resurgence in the semiconductor cycle as contributors to increased tech profits.
Last week proved challenging for major averages, as investors evaluated potential future interest rate cuts by the Federal Reserve. Following an unexpectedly strong September jobs report, traders have discounted the possibility of a half-point rate cut and now predict an 87% likelihood of a quarter-point reduction, according to CME Group’s FedWatch tool. The S&P 500 has thus far experienced declines in October, with the third-quarter earnings season set to commence later in the week. Analysts surveyed by FactSet expect S&P 500 earnings to rise for the fifth consecutive quarter, estimating a 4.2% increase from the same period last year.
Elsewhere, Wells Fargo downgraded Amazon from overweight to equal weight. In June 2023, analyst Ken Gawrelski noted that Amazon was approaching significant positive shifts in its Amazon Web Services and North America Retail segments. He acknowledged that while Amazon continues to represent a long-term margin expansion opportunity, such growth will not be linear. Gawrelski admitted that predictions for margin expansion trends in 2023 and early forecasts for 2024-2025 may have been overly optimistic.
