What’s going on here?
Just a month after unveiling its 2024 projections for the S&P 500, Goldman Sachs announced a newer, higher estimate.
What does this mean?
It’s not just investors feeling cheerful. The Federal Reserve is sounding more festive too, suggesting it’ll pull off a miracle by bringing down inflation without crumbling the economy and job market. The central bank is also dropping hints about interest rate cuts in the new year. That’s a divine mix: lower interest rates shrink borrowing costs, stimulating growth by encouraging spending and business investment. And they give stock and bond prices a lift too. No wonder, then, that Goldman’s boosting its end-of-2024 target for the S&P 500 to 5,100 – an 8% rise.
Why should I care?
For you personally: Find hidden gems.
Most of the market’s returns this year have been delivered by just a few stocks (hello, Magnificent Seven). But next year’s lower interest rates and resilient growth should allow other stocks to get in on the action. So Goldman plans to bet on companies with weaker balance sheets that are more sensitive to economic growth: once the recovery gets going, they’re likely to jump the most. Stocks from smaller firms should also do well: their lower valuations mean they’ve got room to improve, and their reliance on loans means they’ll get more relief from lower interest rates.
The bigger picture: A toast to half-filled glasses.
Yogi Berra was right: “it’s difficult to make predictions, especially about the future”. Just a year ago, investors were hunkering down, prepared for the worst – but the economy has managed to resist a recession and stocks have hit new highs. And sure, there are plenty of factors – like inflation, economic growth, and geopolitics – that could make these new, rosy forecasts seem out-of-touch by this time next year. But for now, it’s okay to celebrate: 2024’s shaping up to be a lot more jolly.
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Originally Posted December 18, 2023 – Goldman Sachs Just Announced A New, Higher Estimate For US Stocks Next Year
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