The sentiment about the value of stocks continues to be relentlessly positive. None other than the powerful investment bank Goldman Sachs Group Inc. (NYSE: GS) has increased its target for the S&P 500. According to MarketWatch:
The Standard & Poor’s 500 index will rise 5% from current levels to reach 1,750 by the end of this year, said Goldman Sachs in a research note dated May 20. A team of strategists led by David J. Kostin, chief U.S. equity strategist, said the index will “advance by 9% to 1,900 in 2014, and climb by 10% to 2,100 in 2015.” The 2013 return implies a year-end price/earnings ratio of 15 times, which is a one mutiple-point premium to Goldman’s fair-value estimate. Improved economic growth, rising dividends — Goldman expects those dividends to gain 30% between 2013 and 2015 — and potentially low sustained interest rates are all contributors to the higher S&P 500 forecasts. If interest rates stay low despite better growth then upside to those S&P 500 targets could be bigger than they are currently forecasting, said Kostin.
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