Goldman Sachs has raised its forecast for U.S. equities, driven by easing trade tensions between the United States and China. This development boosts the attractiveness of investing in the U.S. market and brings renewed focus to a strategy centered on domestic assets. Strategists at the bank now expect the S\&P 500 index to reach 6,500 points over the next twelve months, up from their previous estimate of 6,200 points—an increase of approximately 11% compared to Monday’s closing level.
The update follows gains in U.S. markets on Monday after negotiators from the world’s two largest economies—the U.S. and China—reached a provisional agreement to reduce tariffs. This has fueled optimism that a U.S. economic recession might be avoided. However, Goldman Sachs remains somewhat cautious in its outlook. In a note, the bank’s strategists pointed out that markets have already priced in expectations of economic growth. Combined with lingering uncertainty around the extent of the anticipated slowdown in both growth and earnings, this could limit equity multiples in the coming months.
The bank had previously lowered its forecast for the index twice in March, due to rising recession risks and uncertainty over tariffs. While these concerns have partially eased following the recent agreement, current valuations suggest a potential benefit particularly for large technology firms. Nonetheless, earnings prospects across the market remain mixed. Strategists anticipate that tariffs in 2025 will remain significantly higher than 2024 levels, which may exert pressure on profit margins. In this context, Goldman Sachs advises investors to focus on companies with strong pricing power, as these firms are better positioned to maintain profit margins despite rising production costs.
