Dovish Fed prompts Goldman to raise S&P 500 target just a month after setting it

Goldman Sachs strategists now anticipate the S&P 500 reaching a record level of 5,100 in 2024, citing falling inflation and expected Federal Reserve easing.

The 3-month and 6-month targets are set at 4,800 and 4,900, respectively, while the year-end target reflects a P/E greater than 19x.

The optimistic outlook is supported by recent positive economic data releases such as CPI and PPI. Goldman Sachs notes that equities are now reflecting an even more robust economic outlook.

“The improved macro outlook implies a more conducive environment for bringing IPOs to market. Resilient growth and falling rates should benefit stocks with weaker balance sheets, particularly those that are sensitive to economic growth,” analysts said in a note.

The strategists see upside risk to their S&P 500 earnings estimate for 2024.

“Our top-down EPS estimate of $237 compares with the median strategist estimate of $230. Financial conditions have loosened substantially since October and should boost economic activity and company earnings,” the analysts added.

Goldman’s IPO barometer, which gauges whether the macro environment is favorable to IPO issuance, jumped to 89 and is now near the level associated with the typical frequency of IPOs.

“Looking ahead, higher share prices and an improving cost of capital would imply the friendliest new issuance environment in nearly 2 years,” the analysts added.