S&P 500 Just Surged Past 5000, But Goldman Sachs Thinks It Could Be Even Higher
2min read Last week, the S&P 500 officially broke through the 5000 point mark, and set a historical record of 5048 points last Monday.
Later, despite a temporary slump due to the US's unexpected CPI and PPI data as well as some fluctuations, the S&P 500 is still standing above the 5000 mark with a point level of 5005. As a result, many analysts are becoming more confident about the bullish future of the index.
For example, only two months after setting the target point for 2024, strategists at Goldman Sachs once again raised their expectations for this index - they now predict that the S&P 500 can rise to 5200 points by the end of the year, which is a 2% increase from their prediction in mid-December.
Goldman's target of 5200 points for the S&P 500 index in 2024 is also one of the highest on Wall Street, but in the view of the investment bank's strategist David Kostin and his team, high profit potential from S&P 500 constituent stocks this year are the strongest support for such belief.
Increased profit estimates are the driver of the revision, Kostin wrote in a report to clients on Friday.
In Kostin's opinion, with the expectation of strong economic growth in the next two years and the achievement of higher profits in the information technology and communications services sectors, the earnings per share of S&P 500 constituent companies in 2024 and 2025 will further increase from the expected $237 and $250 to $241 and $256.
In addition, major companies such as Apple, Microsoft, Nvidia, Google, and Alphabet, will be the main force in this wave of profit growth - Kostin states that companies such as Meta and Microsoft who have disclosed their quarterly results show that these big tech companies' fundamentals continue to be strong.
Kostin and his team also pointed out, that if Nvidia's performance indicators for this week are consistent with market expectations, this will suggest a total sales increase of 15% for the Mag 7 in the last quarter, along with an increase of 588.2 basis points in margins, as well as an increase of 58% in earnings growth.
Therefore, the analyst and his team believe, under the impetus of these tech giants, analysts have reason to increase their expectations for the 2024 S&P 500 total profit, and under such circumstances, it is natural that the index points will rise.
In fact, driven by the expected change in the Federal Reserve's policy and the positive sentiment towards AI-lifting tech stocks, the S&P 500 index has risen by 4.9% since the beginning of the year. In January, it even exceeded its historical high for the first time in two years.
In this environment, besides Goldman Sachs, institutions like Bank of America have also recently expressed their willingness to raise their target points for the S&P 500 when investors are not optimistic enough. In the middle of last month, the median of the expected point of the S&P 500 index from nearly a dozen equity strategists had already reached 4950.
On the other hand, even Michael Wilson from Morgan Stanley, who has long been the loudest bearish voice on Wall Street, now expects that the market rally dominated by large tech companies since last year will soon extend to some previously less loved corners, despite his target point for the S&P 500 this year still remains at 4500 points.
In the short term, a target of 5000 points may even be too low, Savita Subramanian from Bank of America said so when asking about her S&P 500 target.