Goldman Sachs equity strategist David Kostin has revised his outlook for the S&P 500, turning bullish following the index’s recent record highs. Kostin’s analysis suggests that further upside is likely, aligning with historical patterns observed after the Federal Reserve begins cutting cycles. The investment bank Goldman Sachs is a leading global financial institution that delivers a wide range of financial services across investment banking, securities, investment management and consumer banking to a large and diversified client base. Its headquarters is in New York.
Kostin’s updated forecasts indicate a positive trajectory for the S&P 500 over the coming months. The new projections estimate returns of +3 per cent and +11 per cent for the next three and twelve months, respectively, placing the S&P 500 at levels of 6400 and 6900. The six-month return forecast, aligning with the end of 2025, stands at +6 per cent, targeting a level of 6600. These revised figures position Goldman Sachs’ year-end S&P 500 forecast at the higher end of strategist estimates.
The revised outlook is underpinned by expectations of earlier and more substantial easing by the Federal Reserve, coupled with lower Treasury yields than previously anticipated. Furthermore, the sustained fundamental strength of major stocks and investors’ willingness to overlook potential near-term earnings weakness contribute to the revised S&P 500 forward price-to-earnings forecast of 22 times, up from 20.4 times.
Goldman Sachs’ economists now anticipate three consecutive 25 basis point cuts by the Federal Reserve starting in September, followed by two additional quarterly cuts in 2026. Consequently, rates strategists project the nominal 10-year US Treasury yield to conclude 2025 at 4.2 per cent, a decrease from the previous estimate of 4.5 per cent. The macro valuation model indicates that a 50 basis point decline in real yields correlates with an approximate 3 per cent increase in the S&P 500 forward P/E ratio.
