NEW YORK: Goldman Sachs has raised its 2024 year-end target for the S&P 500 Index to 5,600 from 5,200 earlier, citing strong earnings growth by five mega-cap US tech stocks and a higher fair value price-to-earnings ratio multiple.

Microsoft, Nvidia, Google, Amazon.com and Meta Platforms have collectively surged by 45% and now comprise 25% of the S&P 500 equity cap, the brokerage said in a note.

“The drivers of the rally include upward revisions to consensus 2024 earnings estimates for these same tech companies, and valuation expansion stemming from increased investor enthusiasm about artificial intelligence (AI).”

The upgraded target reflects an upside of about 3.1% to the index’s last close of 5,431.60.

The brokerage expects roughly unchanged real yields by the end of the year and strong earnings growth to support a 15 times price-to-earnings for the equal weight S&P 500 Index.

“The US election is a key risk to the S&P 500 level and falls between our three-month and year-end forecast horizons,” said analysts at Goldman Sachs.

 - Reuters