(Reuters) – Goldman Sachs raised its 2024 S&P 500 target to 5,600 from 5,200. They cited strong earnings growth by five mega-cap U.S. tech stocks and a higher P/E ratio.
Microsoft, Nvidia, Google, Amazon, and Meta have surged by 45%, comprising 25% of the S&P 500 equity cap. The brokerage wrote this in a Friday note.
It added that the rally was driven by upward revisions to 2024 earnings estimates for tech companies. Valuation expansion was also fueled by investor enthusiasm about artificial intelligence (AI).
The upgraded target reflects an upside of about 3.1% to the index’s last close of 5,431.60.
The brokerage anticipates stable real yields by year-end. Strong earnings growth is expected to uphold a 15x P/E for the equal-weight S&P 500 Index.
Goldman Sachs analysts view the U.S. election as a pivotal risk factor for the S&P 500, spanning their forecast horizons.
The United States will hold its next presidential election in November this year.
The brokerage noted that index volatility tends to rise before elections in election years. However, post-election, volatility often decreases, leading to a rebound in the S&P 500 index.
Meanwhile, Evercore ISI, in a note on Sunday, had raised its year-end target for the benchmark index to 6,000 from 4,750, expecting earnings to grow 8% this year on the back of strong potential from the AI “revolution.”
Moreover, the forecast aligns with other bullish market predictions. Other financial institutions also anticipate growth. As a result, market participants are closely monitoring economic indicators and corporate performance, hopeful for sustained gains.
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