John Deo

Goldman Sachs Lowers S&P 500 Target Amid Market Pullback

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    Posted by John Deo Mar 12 - Filed in General - #financialmodelingprep  - 7 views

    Introduction

    Goldman Sachs has revised its year-end target for the S&P 500 to 6,200 from 6,500, reflecting increased uncertainty in the markets. The adjustment follows a 9% decline in the index, largely driven by weakness in the 'Magnificent 7' stocks, which Goldman now dubs the 'Maleficent 7'.

    Key Factors Behind the Revision

    1. Market Decline & Hedge Fund Positioning

    • The S&P 500 fell 9% from its all-time high, led by a 14% drop in the 'Magnificent 7' stocks.
    • The market downturn was driven by:
      • Policy uncertainty in the U.S.
      • Economic growth concerns.
      • Hedge fund positioning unwinds.

    2. Valuation Adjustments

    • The P/E ratio of the 'Maleficent 7' fell from 30x to 26x.
    • The equal-weighted S&P 500 index (SPW) declined 6% in the same period.
    • The P/E ratio of SPW dropped from 17x to 16x, now 8% below its November peak.

    3. Earnings Growth Outlook

    • Goldman trimmed its 2025 EPS forecast to $262 from $268 (-2.2%).
    • 2026 EPS estimate was also revised down to $280 from $288 (-2.8%).
    • 2025 EPS growth forecast lowered to 7% from 9%.

    Goldman’s S&P 500 Forecast

    Metric Previous Estimate Revised Estimate
    S&P 500 Year-End Target 6,500 6,200
    2025 EPS Growth 9% 7%
    2025 EPS $268 $262
    2026 EPS $288 $280

    Despite the downward revision, Goldman expects an 11% price gain from current levels through year-end, maintaining a cautious but constructive outlook.

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    Conclusion

    Goldman’s revised S&P 500 target reflects market volatility and economic uncertainties. However, their forecast for an 11% upside signals potential recovery if macroeconomic risks stabilize. Investors should watch policy decisions, earnings trends, and valuations closely in the coming months.