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Goldman Sachs revised its forecast for the S&P 500 (SP500), arguing that current conditions point towards higher highs for the benchmark index over a three-, six-, and twelve-month period. This comes as the investment bank identified increased risk appetite among investors, inspired in part by inflation “continuing to reset” and enthusiasm about AI.
In a note to clients issued on Tuesday, Goldman stated that even with the Federal Reserve signaling further rate hikes, inflation is continuing to ease. Meanwhile, the firm noted that their view of a market-implied recession probability in the next year has moved below 50%.
At the same time, Goldman contended that AI has provided a catalyst of buying on the tech front.
“Artificial intelligence represents a new potential long-term catalyst for profits. Although the size and timing of the impact is uncertain, we recently noted that widespread adoption of AI by companies could lift productivity across the economy and lead to greater earnings than we assume in our baseline forecast,” the investment firm stated.
Goldman issued targets of 4300, 4500, 4700 over three-, six- and twelve-month periods. Meanwhile, the S&P 500 looks to open near the 4,440 level on Tuesday morning after topping a new 52-week high last week. Recent optimism has also given a boost to the S&P 500 ETF Trust (NYSEARCA:SPY), iShares Core S&P 500 ETF (NYSEARCA:IVV) and the Vanguard S&P 500 ETF (NYSEARCA:VOO).
While Goldman views the market from a more optimistic lens, not all investment banks are in agreement. Morgan Stanley said “investor sentiment and positioning has turned 180 degrees at an inopportune time,” on Tuesday morning.
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