(Reuters) – Goldman Sachs raised its year-end target for the S&P 500 Index for 2024 to 5,600 from 5,200 previously, citing strong earnings growth from five mega-cap U.S. technology stocks and a higher fair value-to-price-earnings ratio .
Microsoft, Nvidia, Google, Amazon.com and Meta Platforms collectively rose 45% and now comprise 25% of the S&P 500’s share cap, the broker said in a note after markets closed Friday.
“Driving forces behind the rally include upward revisions to 2024 consensus expectations for the same technology companies, and an increase in valuation due to increased investor enthusiasm about artificial intelligence (AI).”
The upgraded target reflects an increase of approximately 3.1% from the index’s last close of 5,431.60.
The broker expects roughly unchanged real returns through year-end and strong earnings growth that will support a 15x price-to-earnings ratio for the equal-weight S&P 500 Index.
“The US election remains a key risk to the S&P 500 level and falls between our three-month forecast horizon and year-end,” Goldman Sachs analysts said.
The United States will hold its next presidential election in November this year.
The brokerage added that pre-election index volatility increases during election years, but post-election volatility typically decreases and the S&P 500 index returns to even higher levels.
(Reporting by Reshma Rockie George in Bengaluru; Editing by Sherry Jacob-Phillips and Rashmi Aich)
