Goldman Sachs raised its year-end S&P 500 (^GSPC) target to 8,000 from 7,600, the investment bank said Wednesday, as the US equity market has largely continued to perform even as the war in Iran inhibits the global energy trade.
The target would represent a 6.4% premium over the benchmark index’s level around 11:30 a.m. ET on Wednesday, hovering near 7,514.
Earnings have grown at an impressive pace throughout a solid start to the year and an exceptionally strong second quarter reporting period, while valuation multiples have declined, Goldman Sachs equity analysts wrote in a report Wednesday morning.
“Earnings growth has powered the entire S&P 500 return so far this year, and we expect this dynamic will continue in coming months,” the analysts wrote, noting also that conditions which have historically “marked the ends of high-valuation, high-concentration bull markets in the past” remain mostly absent today.
The analysts noted that the “beneficiaries of AI infrastructure investment” will account for roughly half of S&P 500 EPS growth this year, as support for the AI trade has continued to propel the market forward.
That’s not to say there aren’t risks, the analysts noted. At the same time as earnings growth has surged, the outperformance of the AI trade also “raises their hurdle going forward,” marking one potential overheating risk for investors. The oil shock caused by the war in Iran could also weigh on growth and tighten financial conditions, the analysts noted.