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Goldman Sachs lowers S&P 500 price target

Goldman Sachs lowers S&P 500 price target

Until a few weeks ago, Wall Street believed that the US stock market was already past its worst and only a new uptrend lay ahead. However, since the United States Federal Reserve (Fed) interest rates raised again, the situation completely changed.

Now, Goldman Sachs thinks the S&P 500 index will finish around 3,600 points for the year, when the previous target was 4,300 points. Considering the current price, a fall of around 2% is assumed in the new projection.

The strategists led David Kostin stated that the higher interest rate scenario in the Goldman Sachs valuation model supports an index-price-earnings (PE) ratio of 15 times, up from 18 times previously.

“Our economists now predict that the FOMC will raise the policy rate by 75 basis points in November, 50 basis points in December and 25 basis points in February to a maximum funds rate of 4.5%-4.75%”which was indicated in the report.

The investment bank said so too risks to its latest forecast remain skewed to the downside due to rising recessionary contractsa scenario that would reduce corporate profits, widen the yield gap and push the benchmark US equity index to a low of 3,150 points, the same level as in July 2020.

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