Goldman Sachs: S&P 500 year-end target 6600! Driven by interest rate cuts + fundamentals

Goldman Sachs, a well-known investment bank on Wall Street, has become increasingly optimistic about the outlook for U.S. stocks, significantly raising its target prices for the S&P 500 index across multiple time frames.

According to a research report released by Goldman Sachs on Monday evening, the expectation for interest rate cuts by the Federal Reserve has been brought forward and deepened, combined with the continued strong fundamentals of large-cap stocks, leading to an upward revision of the return expectations for the S&P 500 index over three months, six months, and twelve months.

The report shows that the bank has raised its three-month return expectation for the S&P 500 to 3%, corresponding to an index level of 6,400 points. The six-month return expectation has been raised to 6%, corresponding to a year-end target price of 6,600 points, a significant increase from the previous expectation of 6,100 points. The twelve-month return expectation has been raised to 11%, corresponding to a level of 6,900 points for the S&P 500 index.

Goldman Sachs pointed out in the report that this upward revision is primarily based on two major factors. First, the change in expectations regarding the Federal Reserve's monetary policy, with the market generally believing that the timing of interest rate cuts will be brought forward and the extent may exceed previous expectations. Second, the strong performance of large-cap stocks continues to provide solid support for the index's rise.

Currently, the S&P 500 index is around the 6,230 level.

Goldman Sachs Brings Forward Expectations for Federal Reserve Rate Cuts: Possible in September

An earlier article from Wall Street Journal stated that economists in Goldman Sachs' research department indicated in a recent report that the Federal Reserve may cut interest rates in September, three months earlier than previously predicted by Goldman Sachs. Goldman Sachs' Chief U.S. Economist David Mericle stated that the likelihood of a rate cut in September is slightly above 50%.

The reason for Goldman Sachs adjusting its rate cut forecast is that preliminary signs show that the impact of tariff policies this year is slightly lower than expected, while other inflation-relief factors are stronger than anticipated. Additionally, senior officials at the Federal Reserve may also agree with Goldman Sachs economists' view that the impact of tariffs on price levels will be one-time.

Moreover, there are signs of weakening in the labor market. David Mericle wrote in the report: "Although the labor market overall still looks healthy, it has become more difficult to find a job." Seasonal residual effects in the data and changes in immigration policies also pose downward risks to employment data in the short term.

In terms of outlook, Goldman Sachs expects that the Federal Reserve will not cut rates at the July FOMC meeting, and anticipates rate cuts of 25 basis points in September, October, and December of 2025, with further cuts of 25 basis points expected in March and June of 2026. Mericle stated that if one of the motivations for rate cuts is preventive measures, then taking action in consecutive meetings is the most natural choice