S&P 500 on Track to Hit Record High Before Year-End: Goldman

With the S&P 500 up 25% in nine months and sitting at its best level since April 2022, people want to know: is an all-time high next?

John Flood, a partner at Goldman Sachs Group Inc., thinks so.

"For first time in 2023 we are currently being asked by multiple clients if we think the S&P 500 is now on track to clock an ATH before year end," Flood wrote in a note to clients Wednesday after a soft reading in the consumer price index lifted the equity benchmark as much as 1.1%. "I am going with a yes on this."

Getting there would require an extension of a rally that has already shocked most on Wall Street amid better-than-expected economic growth and corporate earnings.

The index made a record 4,796.56 in January 2022, about 7% above the last close.

Bloomberg chart of July 13, 2023, showing Goldman's Flood Sees Stocks Rising to Record by Year's End | S&P 500 has staged a powerful rally since October

Flood's optimism is at odds with the majority of Wall Street strategists who keep hanging on to their bearish view that the Federal Reserve's aggressive monetary tightening will lead to an economic slowdown if not an outright recession.

Their average year-end target, as compiled by Bloomberg in mid-June, shows the S&P 500 will fall about 8% by December — the worst second-half outlook since at least 1999.

Stocks have recovered all their losses since the Fed began raising interest rates 16 months ago, with the S&P 500 now trading roughly 3% above where it was at the start of the hiking cycle.

Flood is among a small but growing group of equity bulls that set eyes for new highs.

Ed Yardeni, an early cheerleader of this bull run who has a year-end target of 4,600, says he will probably raise the forecast to 4,800, "depending on how things are shaping up."

The 4,600 projection "looked delusional earlier this year, I have to admit, but it's worked out awfully well," the president of Yardeni Research said in an interview on Bloomberg TV. Second-quarter reporting season, due to kick off unofficially by banks Friday, is likely to bolster equities, as the forecast 9% profit drop sets what Flood calls "another low bar" for corporate America to clear.

While the period likely marks the trough of this earnings slowdown, he notes that excluding the drag from energy, growth already bottomed in the fourth quarter of last year, coinciding with the market's nadir.

"The bar for this period is exceptionally low (again)," Flood wrote. It's "a positive signal for stocks."

– With assistance from Lisa Abramowicz and Jonathan Ferro.

(Image: Adobe Stock)

S&P 500 on Track to Hit Record High Before Year-End: Goldman

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