With the strong rise of the US stock market since the beginning of the year, the S&P 500 index continues to break new highs, and Wall Street's expectations for the performance of the US stock market this year are also constantly increasing.
Last Friday Eastern Time, Goldman Sachs raised its target price for the S&P 500 index in 2024 to 5200 points in its latest report.
This is the second time in just three months that Goldman Sachs has raised its target price for the S&P 500. And other Wall Street investment banks such as Bank of America have previously hinted that they may also raise their target level for the US stock market.
Corporate profit growth or driving up US stocks
Last Friday, Goldman Sachs analyst David Kostin raised the year-end target for the S&P 500 index from 5100 points in mid last year to 5200 points, an increase of approximately 2%. Compared to last Friday's closing price of 5005.7 points, it is equivalent to a 3.9% upward space.
In mid November last year, Goldman Sachs originally set the target price for the S&P 500 index by the end of 2024 at 4700 points. But by December last year, Goldman Sachs had raised this target price to 5100 points. Just two months later, Goldman Sachs raised its expectations for the S&P 500 index for the second time last week.
After this adjustment, Goldman Sachs' target price expectation for the S&P 500 index this year has become one of the highest prices on Wall Street, indicating that Goldman Sachs has also joined the ranks of Wall Street bulls. Previously, both Tom Lee from Fundstrat Global Advisors and John Stoltzfus, Chief Strategist at Oppenheimer Asset Management, had given similar year-end outlook.
The team led by Costin wrote in the report sent to the client, "The increase in (enterprise) profit expectations is the main reason for this revision."
Goldman Sachs strategists also raised their earnings per share forecast for the US stock market for the next two years from $237 and $250 to $241 and $256, respectively. In contrast, Wall Street strategists predict a median profit per share for the US stock market this year of $235.
Goldman Sachs' estimates also reflect its expectations for stronger economic growth and higher profits in the information technology and communication services sector. Among the so-called "Big Seven" in the US stock market, five companies, including Apple, Microsoft, Nvidia, Alphabet, and Meta Platform, are all in the information technology and communication services sector.
The company's strategist predicts that the valuation multiple of the S&P 500 index will remain at the current level, which is 20 times the price to earnings ratio. In this context, "profit growth has become the main driving force for the sustained rise of the US stock market this year."
Other peers are also more optimistic
Since the beginning of this year, the S&P 500 index has risen by a cumulative 4.9%, mainly driven by expectations of loose monetary policy from the Federal Reserve and optimistic sentiment in artificial intelligence boosting technology stocks. Data shows that Wall Street predicts on average that the profits of the 500 constituent companies in the S&P 500 index are expected to increase by 8.8% year-on-year this year.
In addition to Goldman Sachs, Wall Street investment banks such as Bank of America have also hinted that, considering the optimism of market investors, they may also raise their year-end targets.
"The biggest risk facing the S&P 500 index in the near future is upward risk," Savita Subramanian, a strategist at Bank of America, said earlier this month. "In the short term, our target of 5000 points may be too low."
Even well-known bearish Wall Street figure Michael Wilson of Morgan Stanley now predicts that the rise in the US stock market will expand from technology giants that have dominated the rise so far to less popular sectors. However, his 2024 target for the S&P 500 index remains at 4500 points, which means a decrease of about 10% from last Friday's closing price.