Goldman’s David Kostin has seen enough.
I won’t bury the lede: The bank’s new official house call on the S&P is 6000 by year-end.
At this point in my “career” as a macro-market documentarian, I no longer see a lot of utility in penning editorials around each and every ostensibly noteworthy update to sell-side SPX house calls, but I’d be derelict in the eyes of some readers not to mention Kostin’s updated view.
He now sees the world’s benchmark risk asset par excellence summitting the next big round-number milestone by New Year’s. Previously, the bank’s house call was 5600 SPX at year-end.
As the figure shows, Kostin expects 6300 from the cap-weighted benchmark on a 12-month horizon.
It doesn’t take a leap of logic, nor any complicated analysis, to get to SPX 6000 over the next three months. We’re at 5750 now, after all.
Frankly, you don’t need any fundamental analysis at all to get to 6000 by year-end. As Kostin’s colleague on the other side of the bank, Scott Rubner, will attest, 6000 (and beyond) is achievable simply on a seasonals, flow-of-funds trade.
Anyway, the table below gives you the high-level assumptions Kostin’s working with as well as some context via bottom-up consensus and the consensus view among his peers across the Street (i.e., top-down consensus).
So, Kostin’s $3 ahead of his peers for 2025 index EPS and $7 ahead of them for 2026. Bottom-up consensus (i.e., the rolled up estimates of company analysts) has total index earnings topping $307 in the out-year.
The $268 figure (Kostin’s EPS call for 2025) represents 11% growth, nearly double what Goldman saw previously. Kostin cited “stock-specific developments.”
“We assume the market will capitalize earnings of $274 and $300, representing negative revisions to current bottom-up consensus,” he went on, adding that “today’s P/E multiple of 22x is in line with our macro model of fair value.” He sees no additional multiple expansion through year-end.
Market has to get through Israel-Iran, 3Q earnings, and the election. I think any dips from the former will be bought, and while I expect some of the Megas to underwhelm, overall looking for the hurdle to be vaulted. Election and aftermath . . . need to think that through.
In 2025, the last of the pandemic aid will run out. Government employment, at least, may reverse course. Some election outcomes would be stimulus-unfriendly.
https://www.bloomberg.com/news/articles/2024-10-02/post-pandemic-america-has-more-teachers-than-it-can-afford
Would you be willing to share? Which Mega do you expect to underperform and why?
I need to review my notes and recent data pts. My recollec from 2Q was that I thought GOOG and MSFT looked likely to report meaningfully slower growth in 2H, with MSFT having the better chance to distract investors with AI-promises while GOOG labors with the overhang of the third and most dangerous antitrust trial.
*Above not investment advice, just HGPT hallucination”
Still, thanks! 🙂
Post election, the potential for ‘austerity’ (if Harris win, ofc) – at least compared to the recent past – ought to be an unpleasant shock to the markets – unless the policies of abundance deliver lots of early dividends…
Harris + swept Congress: fiscal stimulus continues or increases, possible standoff with bond vigilantes if they still exist.
Harris + gridlock Congress: fiscal stimulus cut via endless budget standoffs, continuing resolutions, Treasury default brinksmanship, etc.
Trump + gridlock Congress: unpredictable (and extrajudicial) executive action. Not sure about fiscal stimulus. Inflationary policies and FOMC takeover.
Trump + swept Congress: end of times, banana republic, fascist state, whatever you can imagine, it is possible.
I would give the Democrats more credit than you do but good summary and lol at the last line.