What You Need to Know
- Its latest forecast is 7% above its previous forecast released just five days ago.
- The strategists assume a higher corporate tax rate and capital gains rate for wealthy investors, as well as a higher 10-year Treasury yield.
- Earnings growth is the primary underpinning for the stronger stock market forecast.
Goldman Sachs strategists have raised their year-end 2021 S&P 500 target to 4,700 — up from the 4,300 target it released just five days earlier.
The strategists, led by David Kostin, also raised their target for the index for year-end 2022 to 4,900 from 4,600. In addition, they increased their earnings-per-share estimates for the index for two years as well: Its latest EPS estimate is $207 for 2021, up from $193, and $212 for 2022, up from $202.
The S&P 500 ended trading Thursday at 4,429.
“The combination of higher-than-expected S&P 500 earnings and lower-than-expected interest rates drive our upgraded price targets,” the Goldman Sachs strategists wrote, noting that the new targets imply a 7% price gain or the remaining of 2021 and 25% for the full year (27% including dividends).
Their forecast for next year is much more modest — 4%, but 6% including dividends.
Earnings growth is the primary driver of Goldman’s more bullish stock market, which strategists say accounts for all of this year’s 17% gain in the S&P 500 and is consistent with patterns typical at the current point in the business cycle.