Market Extra: Goldman Sachs ups its near-term S&P 500 target due to brighter economic picture. But that could knock 25% off stocks, strategists say.

by | Feb 6, 2023 | Stock Market

Provided there are no more economic surprises, stocks are unlikely to face a near-term meltdown and the S&P 500 could work its way back to 4,000. That’s according to a team of Goldman Sachs strategists led by David Kostin. The team lifted their three-month target on the index
which has climbed more than 7% so far this year, to 4,000 from 3,600. But Goldman left its year-end forecast at 4,000, roughly in the middle of a Wall Street forecast target range of 3,400 to 4,500.

Explaining the near-term optimism in a note to clients late Friday, Kostin, chief U.S. equity strategist at Goldman Sachs
said resilient U.S. macro data has outweighed a thus far “unspectacular” fourth-quarter reporting season. Some might say the U.S. data is a little too resilient after Friday’s employment report showed huge job growth of over half a million, far stronger than expected, which weighed on U.S. stocks again on Monday, with the S&P 500 hovering at 4,101. Adding to that positive U.S. economic picture was China’s earlier-than-expected reopening and reduced chances of a Europe recession, the team said, noting that still-light institutional positioning means the market could temporarily overshoot their bank’s 4,000 target. But the strategists drew a line under that cheerfulness, noting that because a soft economic landing is already priced into U.S. stocks, their year-end target is staying where it was for now. They noted that an outperformance of cyclicals versus defensives implies U.S. real economic growth of 2% against Goldman’s own bel …

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