Goldman Sachs boosts S&P 500 earnings forecast to 4,700

Goldman Sachs boosts S&P 500 earnings forecast to 4,700

- Goldman Sachs Group Inc. strategists lifted their outlook for the S&P 500 Index as economic growth and low interest rates fuel optimism that stocks will continue to rally despite record high levels of volatility.

David J. Kostin and his colleagues raised the end - 2021 target to 4,700 after the benchmark U.S. index surpassed their earlier prediction of 4,300 about a month ago, according to a note. This implies a return of about 7% from current levels for the remainder of the year and is the highest forecast in the monthly Bloomberg survey by Wall Street strategists.

The U.S.-China dividend season has been driving up U.S. stocks to all-time highs, outweighing worries about the delta variant, China's crackdown and possible scaling back of monetary stimulus. Goldman strategists today boosted their earnings-per share estimates to $27 from $193 for this year, implying a whopping 45% annual growth.

The combination of lower-than expected S&P 500 earnings and higher than expected interest rates drive the upgraded price targets, Goldman strategists said. 'Relative to consensus, we anticipate stronger revenue growth and more profit margin expansion as firms effectively manage costs and as high-margin tech companies become a larger share of the index.

Americans and corporates would be the largest buyout of U.S. stocks, due to surged buybacks and elevated cash holdings, according to Goldman & Sons. Investors should balance their portfolios with short-term strategic stocks allocations and long-term tactical bets in virus-exposed sectors.

The strategists also increased their end 2022 target of S&P 500 to 4,900 from 4,600. This signals a limited upside for the benchmark, with a return of about 4.3% for the year. The increase in earnings is also expected to slow down next year, with 2% annual EPS growth, they said.