Stock market outlook: Forecasts rise sharply as S&P 500 tops year-end target

The bank’s strategists led by David Kostin now see the US stock index ending the year at 5,600, up from the 5,200 level they had forecast in February. The new target implies a roughly 3% gain in the gauge from Friday’s close.

Goldman’s upgraded target was linked to that from UBS Group AG’s Jonathan Golub and BMO Capital Markets’ Brian Belski at the top of Wall Street.

The target upgrade was “driven by negative-than-average earnings updates and a relatively high P/E multiple,” Kostin, the firm’s chief US strategist, wrote in a note to clients on Friday.

The development comes one month after Kostin reiterated the company’s goal of 5,200, saying there is no more room to top the 500-member scale until December. The firm’s strategists first unveiled their 2024 goal in November, before raising it in December and again in February. The S&P 500 closed at 5,431.60 on Friday.

While the company’s strategists maintained their earnings-per-share forecast for 2024 and 2025, they noted that strong earnings growth at the top five megacap technology stocks has offset “the usual pattern of negative revisions to consensus EPS estimates.” Kostin also raised the S&P 500’s consensus earnings multiple to 20.4 from 19.5.

Kostin speculated on several other scenarios in which stocks could run higher than his new initial forecast. If gains extend and lift the S&P 500 Equal Weight Index, the main, weighted benchmark could rise another 9% to 5,900 before the close of 2024. In his most optimistic scenario, if mega-cap “exceptionalism” continues, the gauge could rise to 6,300 by the end of the year.

Conversely, if earnings estimates appear too optimistic or fears of a recession resurface among investors, the S&P 500 could see a correction of about 13% and fall to 4,700.