Goldman Sachs raised its outlook for the S&P 500. What is encouraging the optimism?

Goldman Sachs has improved its growth forecasts for the main U.S. stock index S&P 500 - in the horizon of three, six and twelve months. One of the largest Wall Street banks believes that the key drivers for the U.S. stock market will be the expected decline in interest rates and stable fundamentals of major companies.

Goldman Sachs raised its U.S. market valuation expectations.  "Earlier and deeper Fed policy easing and lower bond yields compared with our previous forecasts, the continued fundamental strength of the largest companies, and investors' willingness to de-emphasize likely near-term earnings declines support the revision of the P/E forecast for the S&P 500 to 22 from 20.4," Reuters quoted Reuters as saying in a research note published on the evening of July 7.

The investment bank now expects the broad market index to rise 3% over three months and 11% over a year to 6,400 and 6,900 points, respectively. The six-month forecast has been raised from 6100 points to 6600 points by the end of 2025. Goldman maintained its S&P 500 Index earnings per share growth target of 7% for 2025 and 2026. At the same time, the bank warned that the situation can both improve and worsen, and after the end of the reporting season for the second quarter, the forecast may be revised.

Last week, the S&P 500 closed at a record high thanks to strong U.S. employment data, which allayed investor fears about the possibility of a slowdown in the world's largest economy. However, on the first day of the new week, July 7, the S&P 500 slipped 0.8%, the Nasdaq Composite and the Dow Jones - by 0.9%. This is how Wall Street reacted to reports that President Trump has started sending letters to partner countries about imposing higher duties. Earlier, he also threatened to impose an additional 10 percent tariff on goods from countries that, according to him, support the "anti-American policy" of BRICS.

On July 8, futures on U.S. stock indexes show mixed dynamics: the cost of futures on the S&P 500 is almost unchanged, with contracts on the Nasdaq 100 up 0.2%, while contracts on the Dow Jones lost 0.1%.

Despite the flurry of statements from the White House, many investors believe the market has already weathered the brunt of the tariff rhetoric and are pinning their hopes on the upcoming corporate reporting season, which could be a driver of further gains in the S&P 500, reports CNBC.

"If you get into the details, I'm not even sure anyone understands the difference between what was announced today and what existed before, whether it's actually going to be implemented and which companies are going to be affected," Trivariate Research head Adam Parker said on a July 7 TV broadcast. "It's just a bit of profit-taking on the back of hitting peaks and reassessing positions ahead of the reporting season in July," the economist added.

New trade restrictions will challenge corporate earnings forecasts, but that's not necessarily a reason to sell off stocks, said Scott Kronert, U.S. equity strategist at Citigroup. "From our perspective, don't interpret these duties as a factor affecting the index as a whole. They are more likely to have a direct impact on specific companies, industries and sectors than on the aggregate market," he said on CNBC.

This article was AI-translated and verified by a human editor