Goldman Sachs Boosts S&P 500 Target to 6600 on Rate Cut Hopes

Goldman Sachs has significantly raised its target price for the S&P 500 index, projecting it to reach 6600 points by the end of the year. This upward revision is driven by two key factors: the heightened market expectation of interest rate cuts by the Federal Reserve, potentially starting as early as September, and the sustained strong performance of large-cap stocks. The investment bank has also increased its target for the index to 6400 points for the next three months and 6900 points for the next twelve months.

The primary drivers behind this optimistic outlook are the anticipated changes in the Federal Reserve's monetary policy and the robust fundamentals of large-cap stocks. Market participants are increasingly expecting interest rate cuts to occur earlier and with a greater magnitude than previously anticipated. This, combined with the strong earnings and growth prospects of large-cap companies, provides a solid foundation for the index's upward trajectory.

Currently, the S&P 500 index is trading around 6230 points. The revised expectations are based on the belief that the Federal Reserve may reduce interest rates as early as September, three months ahead of the previously projected timeline. This adjustment is supported by preliminary indications that the impact of tariff policies this year has been lower than expected, while other inflation-relief factors have been stronger. Furthermore, there are signs of weakening in the labor market, with indications that finding jobs has become more challenging. Seasonal residual effects and changes in immigration policies also pose short-term risks to employment data.

Looking ahead, Goldman Sachs anticipates that the Federal Reserve will not lower interest rates during the July FOMC meeting. Instead, the bank expects rate cuts of 25 basis points in September, October, and December of 2025, followed by additional cuts of 25 basis points in March and June of 2026. This strategy aligns with the view that preventive measures are a natural choice for consecutive meetings if one of the motivations for rate cuts is to preempt potential issues.