Goldman Sachs has revised its year-end target for the S&P 500 to 5,200, indicating a potential 4% increase from current levels. This adjustment is based on an optimistic earnings outlook for companies within the index.
Previously, Goldman Sachs had predicted the S&P 500 to close at 5,100 by the end of 2024. However, the forecast was increased from 4,700 in December due to easing inflation and expectations of the U.S. central bank lowering interest rates.
In its latest projection, Goldman Sachs anticipates an 8% growth in profits for S&P 500 companies in the current year. This positive outlook is attributed to an improved economic situation in the U.S. and enhanced profit margins for major companies.
David Kostin, lead strategist at Goldman Sachs, stated that strong global GDP growth and a slightly weakened dollar will support earnings per share (EPS). He also highlighted that lower interest rates and reduced oil prices might have a minor adverse impact.
Kostin emphasized the anticipated strength in earnings for large-cap stocks, particularly the Magnificent 7, which is expected to drive overall S&P 500 profits in 2024. The growth in artificial intelligence and consumer strength is predicted to contribute to revenue growth and margin expansion.
According to Kostin, the Magnificent 7 stocks are likely to lead in terms of earnings growth within the S&P 500 sectors. While operating margins for the broader index are expected to improve, the effect will be comparatively smaller. This is due to moderating input costs, such as wage growth, coupled with robust sales growth and only modest further price disinflation.
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