Rolling 30-day correlation between changes in S&P 500 and 10y Treasury yield has popped back into positive territory … all else equal, rising yields no longer as detrimental for stocks (driven by yield moves now being tied more to growth prospects and less to inflation trends) pic.twitter.com/tXHEqClkXj
— Liz Ann Sonders (@LizAnnSonders) October 8, 2024
Goldman Sachs has raised its forecast for the S&P 500 index, projecting a 10% increase to 6,300 over the next year. The investment bank’s analysts, led by David Kostin, expect the index to reach 6,000 by the end of this year and further advance to 6,300 within the next 12 months. The revised targets are an upgrade from Goldman’s previous projections of 5,600 for year-end and 6,000 over the subsequent 12 months.
The S&P 500 was up 34.4% the the past 12 months (ending September).
Now think back to how many times you were told how bad things were this whole time? Yield curves, LEIs, manufacturing PMIs, credit events, only 7 stocks, quad poor, elections, wars, utilities leading, etc. pic.twitter.com/JGJOYB4Z5H
— Ryan Detrick, CMT (@RyanDetrick) October 7, 2024
The analysts argue that profit margins are set to rise, with projected increases to 12.3% next year and 12.6% by 2026, compared to an estimated 11.5% for the end of this year. “The macro backdrop remains conducive to modest margin expansion, with prices charged outpacing input cost growth,” the analysts noted. Goldman’s earnings per share estimate for the S&P 500 has risen from $256 to $268, reflecting an 11% annual increase.
The S&P 500 is up nearly 35% YoY the past 12 months.
This is one of the best 12 month rallies ever going into Q4.
Worth noting October higher only once out of six times it was up 30% or more going into Q4 and Q4 below avg returns as well. pic.twitter.com/hfwwND2Dw5
— Ryan Detrick, CMT (@RyanDetrick) October 5, 2024
Goldman predicts S&P 500 growth
The index is also expected to benefit from resolving significant charges that affected the health care sector this year and growth in the information technology sector, driven by a semiconductor recovery. The bullish outlook comes amid a strong stock market performance, with the S&P 500 up 20% year to date, marking its best first nine months since 1997.
CTAs are projected to sell the S&P 500 in EVERY SINGLE scenario over the next week and month, as much as $38 billion worth, according to Goldman Sachs pic.twitter.com/LnRDkA7pvA
— Barchart (@Barchart) October 8, 2024
Investor optimism is fueled by promising predictions regarding AI’s potential and signs that the Federal Reserve may have successfully managed the economic landscape after a recent drop in unemployment rates. However, not all experts share this optimism. David Kelly from J.P. Morgan Asset Management cautions against investing heavily in risky, high-growth stocks.
He advises investors to consider shifting their portfolios toward value assets or international equities as the current market valuations appear increasingly distorted. “I will say that although I think this is positive for the equity market, I am getting increasingly queasy about the fact that the equity market keeps on pricing in a soft landing,” Kelly said, adding that investors should “dial back risk” if they have already secured sufficient gains.
