Goldman Sachs analyst overhauls S&P 500 targets for 2024 and 2025

Goldman Sachs has boosted its year-end target for the S&P five hundred, while projecting more gains for the benchmark in 2025, as stocks continue to power higher on the back of solid economic growth, falling Federal Reserve rates of interest and expanding corporate earnings.

U.S. stocks are riding a few tailwinds into the last word months of the year, following on from the Fed's dovish pivot on rate cuts in late August and the surprise unveiling of billions in new fiscal stimulus from China, both of which have boosted risk sentiment in markets worldwide.

The S&P five hundred, which ended the 0.33 quarter at an all-time closing high, has risen for every of the past four weeks and seven of the past eight, taking its year-to-date gain past 20.5% as of last Friday.

Stocks are also likely to get besides give a boost to from the 0.33 quarter earnings season, which begins later this week, as well as expanding corporate profits over the last word three months of the year and beyond as the economy continues to outperform forecasts.

LSEG data suggest collective S&P five hundred earnings for Q3 are inclined to grow 5% from last year to around $5.eleven billion. That is down from earlier projections of a $5.19 billion tally but still indicates solid momentum for this year and next, with fourth quarter profits expected to upward thrust 12.5%.

Goldman sees solid earnings growth

Goldman's chief U.S. equity strategist, David Kostin, who trimmed his 2024 earnings growth forecast to Eight.2% from Eight.four% in a note published Friday, still sees that earnings momentum building into next year. He's boosted his profit growth forecast by 5 percentage points to a full-year gain of eleven%.

"The upward revision to our 2025 EPS estimate is larger margin expansion," Kostin said, adding that the "macro backdrop remains conducive to modest margin expansion."

Related: Why stocks are soaring and the rally has room to run

The U.S. economy grew at a Three% % over the three months ended in June and is forecast to expand by around 2.5% over the 0.33 quarter, consistent with the Atlanta Fed's GDPNow forecasting tool. That stronger-than-expected tally puts the U.S. firmly upfront of its developed-market peers.

Kostin lifted his year-end S&P five hundred target to 6,000 points, up from a previous forecast of 5,600. The new target suggests a gain of around four.35% from current levels.

He cites a price-to-earnings more than surely one of twenty-two times for the S&P five hundred, which he sees as "consistent with our macro model of fair value" per chance remain largely unchanged over the subsequent three months.

The S&P five hundred is having its best performance year since.....1997.@SoberLook %twitter.com/TXMvJEXFY3— Lance Roberts (@LanceRoberts) October 7, 2024

For 2025, Kostin pegged the S&P five hundred to upward thrust another 300 points, to a year-end target of 6,300, implying a 10% upside from current levels.

Headwinds to the bullish outlook, alternatively, are commencing to coalesce following last week's blowout jobs report, which showed 254,000 new hires in September alongside quickening wages gains.

Treasury bond yields are moving firmly higher following the data free up, with both 2-year and 10-year notes trading north of 4% for the first time since August, amid concerns of a renewed spike in inflation pressures.

Bond-market headwinds

In fact, 2-year yields topped 10-year yields for the first time the reason is, Fed's zero.5-percentage-point interest-rate cut on Sept. 18, a reinversion of the yield curve may per chance suggest market jitters tied to U.S. inflation risks.

That is additionally being played out within the commodities market, where prices for copper and other metals are gaining ground on the back of China's stimulus push, the biggest in additional than a decade, and the impact of Israel's widening conflict within the Middle East on global oil prices.

Related: Veteran fund manager delivers startling S&P five hundred warning

Brent crude futures contracts for December delivery, the worldwide pricing benchmark, were last seen $1.seventy nine higher at $seventy six.66 per barrel in early Monday trading. WTI futures for November delivery jumped $1.ninety six to $seventy six.34 per barrel.

More Economic Analysis:

• Stocks set for big Fed boost after summer rate cut rethink
• Fed delivers on big rate cut, signals care for cooling job market
• The Fed Dot Plot is more important than a rate cut

• Stocks set for big Fed boost after summer rate cut rethink
• Fed delivers on big rate cut, signals care for cooling job market
• The Fed Dot Plot is more important than a rate cut

"The Bloomberg Commodity Spot Index is now up 10% from the lows in August, and if commodities continue to surge beyond the highs from mid-May, then spot commodity prices are all without delay in territory now now not seen since early 2023," said Saxo Bank's chief investment strategist, Peter Garnry.

"Chinese stimulus and Middle East tensions could be the exact cocktail per chance lead to inflation to linger for longer and prove the market’s current expectations of six US rate cuts by June next year to be too optimistic," he added.

Related: The ten best investing books, consistent with our stock market pros