Stock market outlook: Forecasted to continue rising as S&P 500 reaches year-end target

The bank’s equity strategists led by David Kostin now predict the benchmark U.S. stock index will end the year at 5,600, up from the 5,200 they predicted in February. The new target implies a gain of about 3% in the gauge from Friday’s close.

Goldman’s upgraded target relationship with that from UBS Group AG’s Jonathan Golub and BMO Capital Markets’ Brian Belski took the top spot on Wall Street.

Kostin, the firm’s chief U.S. equity strategist, wrote in a note to clients on Friday that the target upgrade “was driven by slightly negative earnings revisions and multiples.” P/E number has a higher fair value.

The upgrade comes a month after Kostin reiterated the firm’s 5,200-member target, saying there was no room left to increase the 500-member index until December. The firm’s strategists first Introducing their 2024 goals Novemberbefore advanced it in December and again in February. The S&P 500 closed at 5,431.60 on Friday.

While the firm’s strategists maintained their earnings-per-share forecasts for 2024 and 2025, they noted that strong earnings growth for the top five large-cap tech stocks has offsetting the “typical pattern of negative revisions to consensus EPS estimates.” Kostin also raised the S&P 500’s price-to-earnings ratio, which he considers reasonable, to 20.4 from 19.5.

Kostin laid out several other scenarios in which the stock could rise above his new baseline forecast. If the gains extend and lift the S&P 500 Equally Weighted Index, the major capitalization-weighted benchmark could rise another 9% to 5,900 before 2024 ends. In his most optimistic case, if large-cap “exceptionalism” persists, the index could soar to 6,300 by the end of the year.

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