Goldman Sees Equity Peak, Flat Returns Through 2024

• Goldman Sachs chief US equity strategist David Kostin says the S&P 500 could trade flat for the rest of the year.
• He told Bloomberg TV that the index has already reached Goldman’s year-end target of 5,200.
• The firm’s indicators are not signaling much more upside from current levels, although rate cuts could change that.

The stock market rally has run its course for 2024, as the S&P 500 now stands above Goldman Sachs’ year-end prediction, the firm’s chief US equity strategist David Kostin said.

In an interview with Bloomberg TV, he said that there is no economic, valuation, or earnings argument for futher upside, and noted that money-flow models also show further gains will be capped. The S&P 500 surpassed Goldman’s year-end target of 5,200 earlier this month.

That roughly suggests “a flat return from now till the end of the year,” Kostin said, leaving open the possibility for a change in forecast if variables change.

As of now, Kostin’s team projects real GDP growth of just under 3% and earnings growth of about 8%. Meanwhile, valuation are currently high, and unlikely to boost stocks further.

“They’re at an index level basis almost 21 times earnings. So the probability of a multiple expansion, while possible, is less probable,” Kostin said. “The idea of earnings being much greater than we’re assuming we think is pretty low.”

Still, the Goldman stock chief isn’t giving up entirely on the possibility of a bullish turnaround. While this isn’t Goldman’s base case, more upside could come if the Federal Reserve has to cut interest rates more dramatically than assumed, he said.

But so far, Goldman still considers two cuts as the most likely scenario for this year. Markets have kept similar projections, and outlooks were little changed by Wednesday’s cooler-than-expected consumer price index.

“Base case is in fact that the market will trade at around this level of multiple or in fact, even lower multiple as we come towards the end of the year,” Kostin reiterated.

Others are a bit more optimistic that the S&P can break out of a flat run this year. UBS, which also holds a 5,200 target as its base projection, recently noted that a 5,500 could be achieved instead. That’s if the economy keeps disinflating, and spending momentum in artificial intelligence keeps up.