Goldman Sachs Predicts S&P 500 to Hit 6,500 Next Year, And These Industries Will Be 'The Next Winners'

Goldman Sachs' Chief Equity Strategist David Kostin has made a fresh assessment that the S&P 500 index will continue to rise until the end of next year, as the U.S. economy continues to expand and corporate earnings grow.

In a report released on Monday, Kostin raised his year-end target for the S&P 500 from 6,300 to 6,500, implying that the index could rise by 10.3% from current levels.

"In our baseline macro outlook, the economy and earnings continue to grow and bond yields remain around current levels," he added.

However, Kostin emphasized that both upside and downside event risks for the U.S. stock market are high. He noted that friendlier fiscal policy or more dovish Federal Reserve monetary policy could further boost the stock market, although Trump's proposed tariffs and higher U.S. Treasury yields could put pressure on the U.S. stock market.

So far, Goldman Sachs believes that Trump's comprehensive tariff policies and plans to reduce corporate taxes largely offset each other, at least in their forecasts for earnings per share of listed companies.

"We believe investors should take advantage of periods of low volatility to capture equity upside or hedge downside through options," the report said.

Finally, Kostin also predicted that the tech giants will continue to outperform other components of the S&P 500 index next year, but the gap will be the smallest in seven years. Goldman Sachs is bullish on materials, software, and utility stocks.

Goldman Sachs' latest forecast is consistent with Morgan Stanley's Chief Investment Officer Michael Wilson, who also raised his forecast for the U.S. stock market on Monday.

According to Wilson, the Fed's rate cuts, along with improvements in economic growth and the potential for a wave of deregulation under the incoming Trump administration, mean that investors should lean towards a bullish stock market. In light of this, he set his year-end target for the S&P 500 at 6,500.

Meanwhile, in a report released on Monday, UBS strategists expect that the S&P 500 will rise to 6,400 by the end of 2025, with most of the returns to be realized in the second half of next year.

UBS noted: "The Red sweep has fired investors' animal spirits, including for U.S. small caps, which, unlike last year, have kept pace with the significant large cap gains in 2024. We expect this momentum to remain strong into year-end as Trump's cabinet is being formed, before a mild (~5%) drawdown in equities through H1 next year, followed by a strong rebound in the second part of the year."

"With a pro-business presidency on the horizon, we expect a dramatic decline in antitrust activity and a broad push for deregulation," the bank added.