Just a month after unveiling its 2024 projections for the S&P 500, Goldman Sachs has torn up its estimates and unveiled a new, higher projection. Analysts at the Wall Street investment Bank now see the index hitting 5,100 by the end of 2024, a rise of more than 8%.

The S&P 500 is set to reopen later today with modest gains pushing the index to around 4,746, according to futures prices. That implies a 24% gain in 2023 year-to-date.

FESTIVE MOOD

Goldman’s extra optimism stems from the all-round good mood among investors, and crucially, the increasingly cheerful tones coming from the Federal Reserve. Its’ recent comments had investors claiming victory over the inflation monster, propping up confidence that The Fed can pull off a masterstroke by bringing inflation down without battering the economy and jobs market.

Goldman sees a more broadly-based recovery in 2024 / Image source: Adobe

The central bank is also dropping hints about interest rate cuts in the New Year, offering investors a heady mix of lower interest rates that will shrink borrowing costs, stimulate growth by encouraging spending and business investment.

BROADER RECOVERY

But it is also interesting where Goldman sees those gain coming from. This year, most of the market’s gains have come from the ‘Magnificent Seven’ stocks – Apple (AAPL:NASDAQ), Microsoft (MSFT:NASDAQ), Amazon (AMZN:NASDAQ), Alphabet (GOOG:NASDAQ), Meta Platforms (META:NASDAQ), Nvidia (NVDA:NASDAQ), and Tesla (TSLA:NASDAQ), but Goldman believes that lower interest rates and resilient growth in 2024 should allow other stocks to strike out.

Goldman is planning to bet on companies with weaker balance sheets that are more sensitive to economic growth, which it thinks are likely to jump the most as recovery gets going. Stocks from smaller firms should also do well - their lower valuations mean they’ve got room to improve, and their reliance on loans means they’ll get more relief from lower interest rates.

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