Goldman Sachs cuts its S&P 500 forecast, says stocks will drop over 4% by the year’s end as the Fed stays aggressive

Federal Reserve interest rate hikes will weigh on stocks this year, Goldman Sachs warned.

Goldman Sachs on Friday slashed its end-of-year target for the S&P 500 to 3,600, a .
The Fed’s aggressive approach to taming inflation will weigh on stocks, the bank said.
The benchmark US index has plummeted just under 21% as rising interest rates drive a sell-off.

Goldman Sachs has cut its year-end target for the S&P 500, predicting the benchmark US stock index will fall 4.2% as the Federal Reserve sticks to its aggressive tightening.

The Wall Street bank dropped the benchmark’s three-month target from 4,300 to 3,600, and warned that the US central bank’s fast pace of interest rate hikes will likely lead to further stock selloffs before the end of 2022.

“The expected path of interest rates is now higher than we previously assumed, which tilts the distribution of equity market outcomes below our prior forecast,” the bank’s strategists said in a note to clients Thursday. 

“The S&P 500 index actually reached our previous year-end target of 4,300 in mid-August, but the rate complex has subsequently shifted dramatically,” added the team, led by chief US equity strategist David Kostin.

US stocks slipped after the Fed on Wednesday hiked interest rates by an outsized 75 basis points for the third time in a row. The S&P 500 closed 0.84% lower at 3,757.99 on Thursday, after hitting a two-month low of 3,749.35 during that session.

Investors have fretted about the interest rate hikes because of their potential impact on economic growth. 

The Goldman Sachs team warned the S&P 500 could fall as low as 3,400 if earnings of its listed companies decline and the Fed’s attempts to curb red-hot inflation lead to a “hard landing”, where the US suffers a recession.

“The outlook is unusually murky. The forward paths of inflation, economic growth, …read more

Source:: Businessinsider

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