U.S. investment bank Goldman Sachs (GS) has raised its forecast for the S&P 500 index to 5100 from 4700 as the current stock market rally continues.
Analysts at Goldman expect that interest-rate cuts by the U.S. Federal Reserve will serve as a catalyst and propel the American market higher in 2024.
The U.S. central bank signalled earlier in December that it expects at least three interest-rate cuts in the year ahead, news that has led the Dow Jones Industrial Average to hit record levels and pushed the Nasdaq and S&P 500 indices to 52-week highs.
Expectations of rate cuts have also led to a decline in U.S. bond yields, with the yield on the 10-year Treasury dropping to 3.90% from close to 5% in October of this year.
Goldman Sachs says that by the end of 2024, the S&P 500 should be trading at 19.9 times the earnings of its component companies. The index is currently trading at 19.5 times earnings.
Goldman analysts forecast even more growth in 2025, calling for the S&P 500 to continue rising over the next two years.
The investment bank cites slower economic growth as the main risk to its outlook.
Goldman Sachs’ stock has gained 10% in 2023 to trade at $382.45 U.S. per share.
