Goldman Sachs forecasts S&P 500 target of 6500 for 2025-end, joins Morgan Stanley

Goldman Sachs has forecast the S&P 500 index would reach 6,500 by the end of 2025, joining peer Morgan Stanley, on the back of continued growth in the US economy and corporate earnings.

The Wall Street brokerage's target implied an upside of 10.3% from the index's last close of 5,893.62.

On Monday, Morgan Stanley also forecast the benchmark index would hit 6,500 by the end of next year. It estimated the recent broadening in US earnings growth would continue in 2025 as the Federal Reserve cuts interest rates into next year and as business cycle indicators improve further.

Goldman said the so-called 'Magnificent 7' stocks - Amazon, Apple, Alphabet, Meta Platforms, Microsoft, Nvidia, and Tesla collectively will outperform the rest of the 493 companies in the benchmark index next year.

However, the 'Magnificent 7' stocks will outperform by about 7 percentage points only, the slimmest margin in seven years, Goldman said in a note dated Monday.

"Although the 'micro' earnings story supports continued outperformance of the Magnificent 7 stocks, the balance of risk from more "macro" factors such as growth and trade policy lean in favour of the S&P 493 (companies)," the brokerage said.

Goldman estimated corporate earnings to grow 11% and a real US gross domestic product growth of 2.5% in 2025.

The brokerage also warned that risks remain high for the broader US equity market heading into 2025, due to a potential threat from tariffs and higher bond yields.

"At the other end of the distribution, a friendlier mix of fiscal policy or a more dovish Fed present upside risks," Goldman added.

Trump's victory in the US Presidential election earlier this month has brought into sharp focus his campaign pledge to lower taxes and impose higher tariffs, moves that are expected to spur inflation and reduce the Fed's scope to ease interest rates.

The brokerage also projected earnings-per-share of S&P 500 companies at $268 in 2025.