Market: Goldman Sachs sees the S&P 500 at 6,500 points by the end of 2025

(CercleFinance.com) - Goldman Sachs estimates that the S&P 500, the benchmark index for US equity markets, should reach the 6,500-point mark by the end of 2025, according to a presentation released by the investment bank.


Given that the S&P closed last night at 5,917 points, this projection implies a gain of almost 10% over the next 13 months or so.

For the record, the S&P 500 has already gained more than 24% since the start of the year.

In his presentation dated Tuesday, Dave Kostin - the New York-based firm's star strategist - believes that Wall Street valuations incorporate the scenario of a favorable growth environment.

He points out that Goldman's economists are forecasting US GDP growth of 2.5% next year, and 2.3% in 2026.

In his presentation, Kostin points out that half of the S&P 500's 57% rise since the end of 2022 can be attributed to the surge of the "Magnificent Seven".

Estimating that the valuations of these technology megacaps are now approaching fair value, the analyst sees their outperformance fading relative to the rest of the market from next year onwards.

After outperforming the S&P 500 by 63 percentage points in 2023 and 22 points this year, the 'Magnificent Seven' should see their outperformance fade to seven points by 2025, predicts David Kostin.

In his opinion, US mid-caps are better positioned to benefit from US growth, especially given their current P/E of 16x, compared with 19x for the S&P 500 excluding the 'Magnificent Seven'.

The strategist also believes that a resurgence in mergers & acquisitions (M&A) activity could support small and mid-cap stocks next year.

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