Goldman Sachs lifts S&P 500 return forecasts on Fed outlook, large-cap stocks
The Wall Street bank has revised its S&P 500 return forecasts, projecting a 3% gain over three months and an 11% gain over 12 months, targeting index levels of 6,400 and 6,900, respectively.
'Earlier and deeper Fed easing and lower bond yields than we previously expected, continued fundamental strength of the largest stocks, and investors' willingness to look through likely near-term earnings weakness support our revised S&P 500 forward P/E forecast of 22 times from 20.4 times,' analysts said in a note late on Monday.
For the index's six-month return, Goldman Sachs has raised its forecast to +6%, projecting a year-end level of 6,600, and up from its previous estimate of 6,100.
Wall Street closed at record highs last week, buoyed by signs of resilience in the country's labour market, which defied investor fears of a slowing economy.
After a selloff in April following U.S. President Donald Trump's 'Liberation Day' tariff announcements, stocks have rebounded as hopes for trade deals and potential Federal Reserve rate cuts eased investor uncertainty.
'Recent inflation data and corporate surveys indicate less tariff pass-through so far than we expected,' the analysts said.
'However, we expect the digestion of tariffs to be a gradual process, and large-cap companies appear to have some buffer from inventories ahead of the increase in tariff rates.'
The analysts maintained their earnings-per-share growth forecasts for the S&P 500 at +7% for both 2025 and 2026, but flagged that risks remain on both the upside and downside.
They plan to reassess these estimates following the second-quarter earnings season.
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