Goldman’s Kostin Channels Taylor Swift For 2024 S&P Outlook

Goldman’s David Kostin channeled Taylor Swift for his 2024 US equity outlook, released on Wednesday.

I suppose that’s apt. After all, Swift’s name came up again and again in macro discussions this year. According to some reports, she singlehandedly accounted for $5 billion in consumer spending. If Swift were an economy, she would’ve been larger than at least three-dozen countries in 2023. She made a cameo in the Philadelphia Fed’s Beige Book.

According to Kostin, Swift can also help investors with their portfolio strategy in the year ahead. Hold that thought.

Goldman’s 2024 year-end price target for the S&P is 4,700 — so, very modest upside (around 5%, 6% including dividends).

Kostin, informed by projections from Goldman’s economists, expects the US economy to grow at a “modest pace,” avoiding a recession.

I’d be remiss not to note (and Kostin obviously addressed this) that you can get 5% in riskless USD cash, sparing yourself the theatrics that go along with investing in stocks during any given year.

Earnings growth should be around 5%, the same as Kostin’s projected price increase for the index. Valuations are seen steady at ~18x.

“Our forecast falls slightly below the typical 8% return during presidential election years,” Kostin remarked.

Here are some key bullet points from Kostin’s outlook, which spans 39 pages:

  • Our economists forecast above-consensus full-year GDP growth of 2.1% in 2024. However, this view is already reflected in current equity prices.
  • Margins have stabilized, but substantial expansion from the current elevated level is unlikely due to diminishing tailwinds for S&P 500 profitability.
  • Generative artificial intelligence represents one potential driver of corporate earnings upside, but in most cases it will have limited impact on profitability next year.
  • Compared with consensus forecasts, our 2024 EPS estimate is above the median earnings estimate of other strategists but below the bottom-up analyst consensus.
  • Our top-down valuation model suggests that at a forward P/E multiple of 19x, the aggregate S&P 500 index trades in line with fair value on both a historical absolute basis and relative to interest rates, but is unlikely to expand meaningfully in 2024.
  • Our baseline macro forecasts point to a roughly unchanged equal-weight S&P 500 P/E of 14x at year-end 2024 and a P/E of 18x for the aggregate S&P 500 index.
  • We expect the equity market will oscillate in its pricing of alternative scenarios around our baseline forecast.

Not exactly the stuff thrillers are made of, I know. Don’t worry, though: 2024 promises plenty of geostrategic antagonism and high domestic political drama in the US. Markets are famously oblivious to such “trivial” concerns, but as you might’ve noticed, the stakes are getting higher both at home and abroad.

Coming quickly full circle, Kostin said that “at this time next year, portfolio managers will look back and realize the best investment strategy for 2024 was to follow Taylor Swift’s advice in the song from her 1989 album: ‘All You Had To Do Was Stay’ — invested.”


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