Goldman Sachs Strategists Forecast More Stock Gains into 2024

More gains are on the way in the equity markets. That is the stance held by strategists at Goldman Sachs, who believe there is still some room for equities to edge higher after an impressive 2023. The remarks come on the heels of the S&P 500 rallying by about 17% year to date, with tech-heavy Nasdaq 100 rallying by over 40% on growing risk appetite.

Goldman Sachs Estimates

The team at Goldman Sachs led by David Kostin expects the Bull Run to persist into 2024, aided by the Federal Reserve’s slow monetary policy tightening.  The S&P 500 has been on an upward trajectory in 2023 as equities continue to withstand high-interest rates. Easing inflation has convinced the Fed to go slow on hikes and has also helped bolster sentiments.

The investment bank projects that the S&P 500 will close 2024 at 4,700 points, implying a 5% upside potential from current levels. However, this gain will be much lower than the 17% rally registered this year.

A second year of gains in 2024 would mark a significant turnaround from the bear run in 2022 that saw most counters tumble by double-digit percentage points. The slump came at the back of soaring inflationary pressure and the Fed’s aggressive monetary policy tightening spree.

Goldman Sachs’s bullish thesis depends on the US economy avoiding a recession. There have been fears that the Federal Reserve’s sticking to the high-interest rate environment could cause a mild recession. With the Fed unlikely to cut interest rates until mid-next year, the economy could heat up.

Equities came under pressure in the third quarter amid fears that the Fed will continue hiking interest rates instead of cutting at year-end. While fears have subsided regarding the Fed’s pausing of hikes for two consecutive meetings, there is still a chance the economy could plunge into recession due to the high-interest rate environment.

Equities Outlook

Nevertheless, the economy avoiding recession is not the only factor that Goldman Sachs expects to offer support to rallies in the equity market. The strategists expect rising earnings to have a significant impact in fuelling investor interest in equities. Valuations remaining steady should also continue to fuel risk appetite in the equities market.

Kostin and the team expect returns in the equity markets to be concentrated in the second half of next year due to resilient growth. Nevertheless, the looming US election is a major headwind that could suppress market risk appetite. However, later in the year, election resolution and a possible Federal Reserve Interest rate cut could offer the market the much-needed lift heading into 2025.

Strategists at Goldman Sachs are not the only ones overly bullish about US equities. Strategists at Morgan Stanley, led by Stanley Wilson, a staunch bear, have also taken a more positive view of stocks. Strategists at Bank of America insist investors expect a soft landing next year and remain overweight stocks and bonds.

The investment bank forecasts are supported by cooler-than-expected October US inflation data showing slowing inflationary pressures. The data signals that the Federal Reserve may not raise rates again, something that works in favor of equities.