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Goldman Sachs forecasts upside for S&P 500 amid AI revolution

Published 14/06/2023, 12:23 pm
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Investing.com - Goldman Sachs Group Inc (NYSE:GS) has increased its year-end projection for the S&P 500, setting the new target at 4,500. This estimate suggests a potential growth of approximately 5% from where it currently stands and an impressive increase of around 17% for the index in the upcoming year.

The anticipated gains can be attributed to artificial intelligence (AI) advancements that are expected to stimulate market performance. The investment banking firm believes that Wall Street's enthusiasm about AI technology will positively impact stock market rallies and contribute to this overall upward trend.

Previously estimating a year-end figure of around 4,000 points, Goldman Sachs now envisions more optimistic outcomes. In comparison with last year's closing number at approximately 3,839 points, these predictions signal substantial progress ahead for investors.

Maintaining their initial corporate earnings forecast at $224 per share, strategists have expressed confidence in avoiding economic recession during the latter half of next year. They attribute part of this projected success to ongoing developments in AI technology which could enhance productivity levels and subsequently drive higher profits across various industries.

In addition to technological breakthroughs bolstering financial markets, other encouraging signs indicate further opportunities for growth. For instance, current measurements show that winning stocks within the S&P 500 exhibit highly concentrated performances - a pattern reminiscent of previous tech bubbles brought on by excitement surrounding innovative technologies like AI.

Historically speaking though, such narrow distributions among top-performing stocks often precede broader expansion throughout entire markets - offering yet another reason behind strategists' positive outlooks on future valuations.

Despite acknowledging risks associated with potential recessions or shifts towards stricter monetary policies from regulatory bodies like the Federal Reserve Bank (Fed), Goldman Sachs remains hopeful regarding long-term prospects. Should a recession occur, the S&P 500 may experience a drop of roughly 21% to around 3,400 points - even lower than last October's trough of approximately 3,600 points. Furthermore, corporate earnings could decline by about 10%, potentially reaching $200 per share.

However, with AI propelling productivity and market growth in various sectors, this year-end forecast for the S&P 500 remains optimistic overall.

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