Goldman Sachs expects the S&P 500 to surge to 5,200. It is at 5,000 now. The increase would appear tame at first, but on a second look, it is not.
The S&P 500 has already had a remarkable run. A year ago, the index stood at 4,000. There has to be a correction. Markets rarely run so hot and so fast. Goldman thinks this market will defy gravity. That is, at least in the short and medium term.
Goldman believes the increase will be earnings-based. Earnings were fairly good last year. However, any increase will be based on the stocks that drive the market (Apple, Microsoft, Meta, Nvidia, Amazon, and Alphabet). If one or more stumbles badly, the Goldman forecast is in jeopardy. Reuters described the Goldman prediction this way: “Goldman on Friday forecast an 8% profit increase for S&P 500 companies this year, fuelled by an improved U.S. economic outlook and stronger mega-cap profit margins.”
What the Goldman forecast does not take into account is a recession or geopolitical risk. The United States dodged a recession last year. Some economists believe that a downturn is inevitable because interest rates remain high. Mortgage rates could slow real estate transactions. And expensive items like cars can cost too much for people to do any more than hold an old car for another year or so. (This is the hottest housing market in America.)
And there are risks of Middle East turmoil, tensions around Taiwan, and a lockdown of the Suez Canal, which would tighten supply chains. Could the world avoid all these for another year? If not, the Goldman Sachs forecast could be wrong.
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