Goldman Sachs increases its 2024 year-end target for the S&P 500 to 5,600, driven by strong earnings from mega-cap tech stocks and investor enthusiasm about AI.
Bollywood Fever: Goldman Sachs has raised its 2024 year-end target for the S&P 500 Index to 5,600 from 5,200, citing robust earnings growth from five major U.S. tech stocks and a higher fair value price-to-earnings (P/E) ratio multiple.
In a note released after markets closed on Friday, the brokerage highlighted that Microsoft, Nvidia, Google, Amazon.com, and Meta Platforms have collectively surged by 45% and now account for 25% of the S&P 500’s equity cap.
“The drivers of the rally include upward revisions to consensus 2024 earnings estimates for these same tech companies, and valuation expansion stemming from increased investor enthusiasm about artificial intelligence (AI),” Goldman Sachs stated.
The updated target suggests an upside of about 3.1% from the index’s last close of 5,431.60. The brokerage also expects that roughly unchanged real yields by the year-end and strong earnings growth will support a 15x P/E ratio for the equal-weight S&P 500 Index.
“The (U.S.) election remains a key risk to the S&P 500 level and falls between our 3-month and year-end forecast horizons,” Goldman Sachs analysts noted. The United States is set to hold its next presidential election in November this year.
Goldman Sachs added that index volatility typically increases before the election but tends to subside afterward, with the S&P 500 index often rebounding to even higher levels.
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