The stock market could see a significant surge of up to 15% by the end of the year, according to a bullish scenario presented by Goldman Sachs. The bank believes that the continued exceptional performance of mega-cap tech stocks could propel the S&P 500 to as high as 6,000.
Goldman Sachs emphasized that the current growth stock rally is different from previous experiences, as investors are now focusing more on profitable growth rather than speculative companies that have yet to turn a profit. Chief equity strategist David Kostin highlighted that long-term growth expectations for the S&P 500 are at 11%, slightly above the historical average but still below previous peak levels seen during market frenzies.
Despite concerns about concentration in mega-cap tech stocks, Goldman Sachs argues that the companies are growing at a much faster pace than the rest of the market. Annualized sales growth for the top tech stocks is expected to be four times higher than the rest of the S&P 500 stocks from 2023 through 2025.
Furthermore, indicators of a potential bubble in the market, such as valuation spreads, are not showing any warning signs at the moment. The valuation premium of cap-weighted S&P 500 relative to equal-weighted S&P 500 is currently at a manageable level, according to Goldman Sachs.
Lastly, Goldman Sachs pointed to Nvidia’s recent GPU Tech Conference as a positive sign for the AI sector, indicating strong demand and constrained supply in the market. Overall, the bank remains optimistic about the potential for further growth in the stock market, driven by the continued success of mega-cap tech stocks.
