Goldman Sachs raises S&P 500 target on tech surge

Goldman Sachs has adjusted its year-end target for the S&P 500 Index for 2024, increasing it to 5,600 from 5,200. This change is a result of the impressive earnings growth in major U.S. tech companies like Microsoft, Nvidia, Google, Amazon.com, and Meta Platforms. These tech giants have collectively surged by 45%, now accounting for 25% of the S&P 500 equity cap.

The market rally is fueled by positive revisions to the 2024 earnings estimates for these tech firms and growing investor excitement around artificial intelligence (AI), leading to higher valuations. This new target suggests a potential 3.1% upside from the index's recent close at 5,431.60.

Goldman Sachs foresees stable real yields by year-end and expects robust earnings growth to maintain a 15x price-to-earnings ratio for the equal-weight S&P 500 Index. However, the upcoming U.S. election poses a notable risk to the S&P 500 level, falling within the forecast horizon of three months to year-end.

Historical data indicates increased index volatility in election years leading up to elections. Yet, post-election, volatility tends to decrease, and the S&P 500 index typically rebounds to higher levels. The next U.S. presidential election is scheduled for November this year.

Goldman Sachs' upward revision of the S&P 500 year-end target to 5,600 reflects the strong performance of tech companies and positive market sentiment. Investors are optimistic about the growth potential in the tech sector, particularly driven by AI advancements. While the upcoming U.S. election introduces some uncertainty, historical trends suggest a post-election market rebound. This forecast provides valuable insights for investors navigating the current market landscape.