Goldman Sachs Strategists Predict Further S&P 500 Rise, Other Analysts Remain Cautious

The S&P 500 entered so-called “bull territory” last week after rising more than 20 percent since bottoming out last October, but leading Wall Street strategists are divided on the future direction, reports Bloomberg.

The Goldman Sachs strategists, led by David Kostin, now believe that the broader US index will stand at 4,500 at the end of 2023. The forecast, which points to a 5 percent rise from Friday’s close, is an upward adjustment from the previously estimated 4,000.

Tracks a broader rally

“Previous cases where the breadth of the recovery has narrowed sharply have been followed by catch-up with a broader reassessment of valuations,” the news agency said in the note dated 9 June.

The strategists therefore envisage the stock markets in the US rising further, primarily by other sectors catching up with the fiery rise for the technology sector.

The Goldman forecast stands in stark contrast to Morgan Stanley and chief strategist Michael Wilson, who instead point to the “bear market” of the 1940s when the S&P 500 rose 24 percent before plummeting to new lows.

“Several are declaring that the ‘bear market’ is officially over.” We respectfully disagree because of our forecasts for earnings in 2023,” writes Wilson, according to Bloomberg, in a note.

Track earnings decline

The Morgan Stanley strategist expects earnings for the S&P 500 companies to fall 16 percent from 2022 to 2023, before picking up sharply again in 2024. In comparison, an analyst survey conducted by Bloomberg points to an earnings drop of only 2.4 percent in 2023.

Wilson is known as one of Wall Street’s most negative voices, but stayed in 2022 voted the world’s best strategist by Institutional Investor for his accurate prediction of last year’s sharp fall in the stock market. So far, the prediction of a further fall in 2023 has proved wrong.

The strategist predicted at the start of 2023 that the S&P 500 would fall to 3,000-3,300 points in the first quarter of 2023. When the quarter ended, the index stood at 4,109.31.

According to the news agency, the story seems to be on the side of David Kostin and his Goldman colleagues. Last week, Bank of America strategist Savita Subramanian highlighted an analysis showing that since the 1950s, the S&P 500 has risen in 92 percent of the 12-month periods following the confirmation of a “bull market.”