Goldman’s US equity forecast for 2024

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Alphaville remains disappointed by the ongoing lack of “just close the fucking door” references from the sellside, despite our promise of a special prize to the first who gets one published.

But Goldman Sachs’s David Kostin has managed to work in multiple Taylor Swift references into his 2024 outlook, and for traffic reasons that’s probably even better, so here we are.

The report — titled “All You Had To Do Was Stay” — goes into Goldman’s US equity forecasts, and is mostly informed by the investment bank’s beatific outlook for the economy and Kostin appreciation for Tay-Tay.

The launch of singer-songwriter Taylor Swift’s “Eras” tour represented one of the most notable cultural events of 2023. Global ticket sales are estimated to exceed $1 billion. The tour’s economic multiplier effect is significant. As evidence, the Federal Reserve Bank of Philadelphia specifically noted in a recent Beige Book commentary that “May was the strongest month for hotel revenue in Philadelphia since the onset of the pandemic, in large part due to an influx of guests for the Taylor Swift concerts in the city.”

The Eras tour will conclude in late November 2024, roughly corresponding to the 12-month horizon of the market forecast in this report. As homage to the global icon, our 2024 US Equity Outlook is subtitled “All You Had To Do Was Stay” — invested. The title of the song from Taylor Swift’s 1989 album reflects our baseline forecast that despite intermittent volatility, fund managers will ultimately be rewarded for staying invested through the end of next year.

Yes, it’s a tortuous reference. But FTAV is in no position to throw stones. If you want more detail, you can find the full report here.

In substance, the GS forecasts are a decent fit for the classic sellside prediction pattern of either “higher, then lower” or “lower, then higher” (with the notable exception being Tom “higher, then even higher” Lee and Albert “lower, then FUBAR” Edwards).

Here is The Story of US stocks (sorry) in chart form:

That’s because Kostin thinks still-resilient economic growth and looming presidential election will keep investors cautious in the first half of 2024, but the actual election and the first rate cuts will force investors to Shake It Off and push them back into stocks (markets are weird, OK). The End Game is the S&P 500 at 4,700.

But the 5 per cent overall gain Kostin predicts means that We Are Never Ever Getting Back Together with the Jan 2022 high (at least in the coming year). If you think the artificial intelligence craze might get us Out Of The Woods then Kostin has some bad news, at least for the near term.

Generative artificial intelligence (AI) represents one potential driver of corporate earnings upside, but in most cases it will have limited impact on profitability next year. Certain companies have been obvious near-term beneficiaries of the AI-driven demand for computing power to run AI large language models. Other firms are potential long-term beneficiaries that may experience an EPS boost from the impact of AI adoption on labor productivity in coming years.

OK OK, enough painful Swift references. Goldman’s forecasts are reasonably in line with what we’ve seen so far from the rest of the sellside, with the caveat that the year-ahead outlook tsunami has only just started.

UBS also forecasts 4,700 for the S&P 500 at the end of 2024, Wells Fargo has a target range of 4,600-4,800, which is a not-very fancy way of saying “4,700, probs, maybe, dunno”. Morgan Stanley’s Mike Wilson is a little gloomier, and predicts it will end flat on the year at 4,500.

In other “news” — and we know this is going to come as a major surprise to some Alphaville readers — Pimco thinks equities are a tad expensive but bonds look just plain awesome.

In fact, the world’s biggest fixed income-focused investment group “strongly” favours fixed income, thinks the case for fixed income is “compelling”, and reckons this is an “optimal time to consider overweighting fixed income in asset allocation portfolios”, according to its 2024 market outlook. So there.

Further reading:

— Why is it so hard to work out how much money Taylor Swift is making? (FTAV)