With little prospect of the Federal Reserve dialing back on its aggressive rate hikes to curb inflation, Goldman Sachs has reduced its year-end 2022 target for the S&P 500 by approximately 16%. This sees the benchmark index’s target adjusted from 4,300 points to 3,600 points. The index closed at 3,758 points on Thursday.
Goldman analyst David Kostin gave the following explanation in a note to investors: “Based on our client discussions, a majority of equity investors have adopted the view that a hard landing scenario is inevitable and their focus is on the timing, magnitude, and duration of a potential recession and investment strategies for that outlook.”
Kostin added that inflation has been more persistent than the investment banking giant first expected and that it is showing little sign of easing in the near term, thereby further validating the Federal Reserve’s stricter monetary approach.
As inflationary pressures rose, so too did consumer prices spike in August against analysts’ expectations. Kostin explained that should the current economic trend persist, a recession in the United States in 2023 would seem likely.
Goldman Sachs was not alone in its projections, with fellow investment banking company UBS cutting its 2022 year-end target for the S&P 500 as well, albeit to 4,000 points.