Goldman Sachs Group Inc. strategists have revised their 2024 target for the S&P 500 upward just a month after setting it.
Goldman’s Kostin predicts S&P 500 to near record high next year
With the Fed’s dovish turn last week and inflation slowing, real yields will fall, supporting stock valuations, the team led by David Kostin said in a note. “Equities were already pricing in positive economic activity, but now reflect an even more robust outlook.”
Kostin expects the S&P 500 to reach 5,100 by the end of next year. He expects the S&P 500, along with Bank of America (BofA) and Oppenheimer Asset Management, to reach new highs next year. Mr. Kostin further revised his forecast upward by about 9% from his mid-November estimate of 4,700.
He also said the outlook for next year’s corporate profits, which is expected to rise 5% from a year ago, may prove too pessimistic. This is because easing financial conditions could boost economic activity and corporate profits.
Mr. Kostin also pointed out that, even as stock prices have soared, $1.4 trillion (approximately 200 trillion yen) has flowed into money market funds (MMFs) this year due to rising interest rates, and that the amount of inflows has increased significantly from U.S. stocks. He noted that the amount is significantly higher than the $95 billion of the previous year. “If interest rates start to fall, investors may move some of their cash into stocks,” he said.
Even Morgan Stanley’s Michael Wilson, who has been particularly bearish on Wall Street this year, believes the Fed’s dovish turn will ensure a shift in monetary policy in time to achieve a soft landing. He points out that this is a sign that the company is thinking about what it wants to do. “This is a bullish development for stocks,” he said, because if the U.S. Federal Reserve prioritizes maintaining growth rather than bringing inflation down to target, it increases the odds of avoiding a recession.
Although there is a risk that a dovish turn could eventually lead to a reacceleration of inflation, “this is welcome news for equity investors, especially given the bond market reaction to dovish guidance,” Wilson said. Markets don’t seem to think the U.S. Federal Reserve is making the wrong policy decisions, he wrote. Wilson maintains his S&P 500 target for next year at 4,500. This is nearly 5% below its most recent closing price.
news-rsf-original-reference paywall">Original title:Goldman Upgrades S&P 500 Target by 9% a Month After Setting It(excerpt)
2023-12-18 14:35:16
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