Although the S&P 500 index has recently hit new highs, Goldman Sachs strategists clearly still have confidence in the continued rise of the US stock market. In their optimistic scenario, technology giants led by the "Seven Giants" will lead the index to further increase by 15% to 6000 points.
Goldman Sachs strategist David Kostin's team wrote in a report that the company adheres to its current forecast and expects the S&P 500 index to bottom at 5200 points in its underlying scenario, which is similar to the current level of the index - as of last Friday's close, the S&P 500 index closed at 5234.18 points.
However, at the same time, Goldman Sachs strategists have also suggested that due to the uncertain valuation prospects of the US stock market, they have explored potential scenarios beyond the fundamentals - and in their most optimistic scenario, the S&P 500 index may rise to 6000 points.
Large tech stocks are still expected to grow further
The reason why Goldman Sachs strategists have set the basic expected target for the S&P 500 index at 5200 points by the end of the year is because they believe that the Federal Reserve's interest rate cut path and the trajectory of US economic growth have been fully priced by the market.
But at the same time, they also mentioned that in their most optimistic scenario, the valuations of large technology companies may continue to rise. By the end of the year, the S&P 500 index will rise to 6000 points, with an expected P/E ratio of 23.
"Although the market seems to be very optimistic about AI, the long-term growth expectation and valuation of the largest TMT stock are still far from reaching the level of 'foam'," strategists wrote.
The S&P 500 index has risen nearly 10% this year and has approached or exceeded the year-end target set by many Wall Street strategists at the beginning of the year. Strong US economic data, expectations of interest rate cuts by the Federal Reserve, and optimistic sentiment towards artificial intelligence stocks are all factors driving the index's rise.
Goldman Sachs pointed out that many investors still have concerns about the Federal Reserve's interest rates; Quota; Long term high position; Quota; There are concerns about the risk of rising capital costs, and a large part of the market continues to be under pressure as a result. If this concern is alleviated, it will bring new impetus to the rise of the US stock market.
"Changing the interest rate outlook without deteriorating the economy is a necessary condition for the market to expand its upward momentum," said strategists.
The US stock market is not without the risk of a decline
Goldman Sachs also provided estimates of the possible direction of the index in several other scenarios. They said that another optimistic situation is that the US stock market will "catch up" with the valuation of COVID-19, which may make the index reach 5800 points by the end of the year.
There are two more pessimistic scenarios - if the sales growth expectations of US stock companies are proven to be overly optimistic, or if investors start to digest the risk of economic recession, this will put the US stock market in a predicament.
Strategists say that both scenarios could lead to the S&P 500 closing at 4500 points, which means a 14% drop from current levels.
At present, mainstream investment banks on Wall Street have a target price of 5500 points for the S&P 500 index at the end of the year. Last Thursday, Faxing released a report stating that the bank has raised its target for the S&P 500 index from 4750 points to 5500 points due to the solid macroeconomic foundation and strong corporate profit growth in the United States.