Analysts at Goldman Sachs say further stock price gains are still possible.

new york
CNN
—

It’s been a rough road for the stock market this year, but investors aren’t complaining.

That’s because the market has hit new highs and has already soared beyond analysts’ expectations for 2024.

The S&P 500 has risen more than 10% since January and last week surpassed Goldman Sachs’ year-end target of $5,200.

So what happens next?

That question is weighing on investors’ minds, Goldman Sachs strategists wrote in a note Friday.

Analysts led by David Kostin, chief U.S. equity strategist at Goldman, offer a scenario in which megacap tech stocks continue to grow and the S&P 500 could rise another 15% to the 6,000 mark by year-end. did.

Analysts say the current rally in growth stocks is unlike what happened during the 2021 market crash or the tech bubble. This time around, investors are paying more attention to how much profit companies are actually making.

And while enthusiasm for artificial intelligence is at an all-time high, Goldman analysts say growth expectations and valuations for the biggest technology, media and communications stocks are “still far from bubble territory.” said.

The investment bank also presented a more subdued scenario in which the S&P 500 index rises 11% to reach 5,800 by year-end. In this case, the market only needs to catch up to pre-pandemic valuation levels.

Analysts wrote that both of these increases depend on the Federal Reserve’s next policy actions. Investors are concerned that in response to persistently high interest rates, the central bank will keep interest rates high for longer than previously expected.

Analysts said, “In order to expand the market’s rise, we need to change the outlook for interest rates without causing a worsening of the economy.” “Today, much of the market remains weighed down by concerns about a ‘prolonged period of high interest rates.’

They also presented a worst-case scenario in which big tech stocks could fail to live up to expectations and the market could fall 14% this year.

But for now, Goldman analysts will maintain their baseline forecast for the S&P 500 at 5,200. This means the market will be down about 1% by the end of the year.

“Both our expected path for the federal funds rate and our above-consensus economic growth forecast appear to have already been priced in by the market,” they wrote.