Goldman Sachs (GS) has set an ambitious target for the S&P 500 (^GSPC) index, predicting it will climb to 6,500 by the end of 2025, a projection that aligns with Morgan Stanley’s (MS) similar forecast, as reported by Reuters. This target suggests a more than 10% increase from the index’s most recent closing value of 5,893.62, driven by robust economic growth and the continued upward trajectory of corporate earnings in the U.S.
Morgan Stanley’s prediction also anticipates the S&P 500 reaching 6,500 by the end of next year, attributing this growth to an expected continuation of the expanding U.S. earnings growth, facilitated by anticipated Federal Reserve interest rate cuts in the coming year alongside improvements in business cycle indicators.
Goldman Sachs highlighted that the ‘Magnificent 7’ tech giants – consisting of Amazon (AMZN), Apple (AAPL), Alphabet (GOOG, GOOGL), Meta Platforms (META), Microsoft (MSFT), Nvidia (NVDA), and Tesla (TSLA) – are expected to continue their dominance, albeit with a narrower margin of outperformance. These companies are forecasted to beat the rest of the S&P 500 companies by roughly 7 percentage points, the lowest differential in seven years, signaling a potential shift in market dynamics.
The brokerage’s note emphasized that while these tech leaders might continue to excel due to their earnings stories, broader market risks from macroeconomic factors like growth and trade policies could benefit the other 493 companies in the index. Goldman Sachs projects an 11% growth in corporate earnings alongside a 2.5% increase in real U.S. GDP for 2025.
However, Goldman Sachs also cautioned about potential risks to this optimistic outlook, pointing to possible threats from imposing tariffs and rising bond yields which could challenge the broader equity market. On the flip side, they noted potential upside risks if fiscal policies turn favorable or if the Federal Reserve adopts a more dovish stance.
The recent U.S. Presidential election, resulting in Donald Trump’s victory, has spotlighted his economic policies, particularly his plans to cut taxes and increase tariffs, which could stoke inflation and consequently influence the Fed’s monetary policy decisions.
Lastly, Goldman Sachs projected the earnings per share for S&P 500 companies to reach $268 in 2025, reflecting their expectation of sustained corporate profitability.
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