Goldman slashes year-end S&P 500 target to 3600

Goldman Sachs’ equity strategist David Kostin has taken a machete to his mid-August year-end target for the S“The expected path of interest rates is now higher than we previously assumed, which tilts the distribution of equity market outcomes below our prior forecast,” Kostin wrote.P 500 fell 1.7 per cent o 3693; the benchmark has tumbled 10.6 per cent in the last month.

“The higher interest rate scenario that we now incorporate into our valuation model supports a price to earnings of 15 times from a prior forecast of 18 times,” he said.“The tightest yield gap between equities and rates since the pandemic further tilts the balance of risks to the downside.”P 500 could drop to 3150 if the US economy entered recession.“The outlook is unusually murky,” Kostin said.

“We recommend ‘outdex’-ing over indexing: own US stocks with the exception of those that may not be adequately pricing in today’s key risks: duration, leverage, labour intensity, currency and crowding.” “Outside of the immediate interest-sensitive sectors, there has been little evidence the real economy is responding to the Fed’s policy tightening. Against persistent core inflation pressures, the Fed is on track to continue tightening at a faster pace than we had originally anticipated.

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