Bullish sentiment heats up! Goldman Sachs and Bank of America raise their S&P 500 target, with a peak forecast of 6,900 points

According to the Zhitong Finance APP, Wall Street's bullish sentiment towards the S&P 500 index is heating up, with Goldman Sachs and Bank of America both raising their target levels for the index due to strong performance from large listed companies, declining bond yields, and the Federal Reserve's easing policies arriving earlier than expected.

Goldman Sachs currently expects the S&P 500 index to rise to 6,600 points by the end of the year and reach 6,900 points within 12 months, raising its previous forecasts by 6% and 11% respectively, citing that the Federal Reserve will take interest rate cuts earlier. This is the second time in two months that Goldman Sachs strategists have raised their expectations, and the fourth adjustment of the S&P 500 index target this year, reflecting the challenges faced by Wall Street strategists amid tariff uncertainties.

Goldman Sachs raises S&P 500 index target again

Bank of America has raised its year-end target for the S&P 500 index to 6,300 points and its 12-month target to 6,600 points, citing that despite ongoing policy uncertainties and high sovereign bond yields, U.S. companies continue to demonstrate strong adaptability.

Bank of America analyst Savita Subramanian stated, "Corporate transparency remains intact. Most companies continue to announce profit expectations, and the estimated dispersion (a measure of uncertainty in earnings per share) is close to post-COVID lows. Since the pandemic, fluctuations in exchange rates, inflation, and interest rates have not impacted the profit margins of S&P 500 constituents—companies have either adjusted or exited the index."

Goldman Sachs still expects a 7% growth in earnings per share for S&P 500 constituents in 2025 and a 7% growth in 2026, but simultaneously warns that there are certain risks to its forecasts.

Goldman Sachs analyst David Kostin stated, "The changing tariff landscape brings significant uncertainty to our earnings forecasts. Our earnings forecast for 2025 is broadly in line with market expectations, but our forecast for 2026 is below market expectations. The main downside risk to our earnings per share forecast is the final tariff levels and their impact on corporate profits."

Bank of America expects limited upside for the stock market in the short term and believes that in the absence of clear earnings signals and short-term interest rate catalysts, the index will consolidate sideways in the third quarter.

Subramanian noted, "Remember, stock price returns are only half the story—dividends may play a larger role in the future. During the zero interest rate policy period, dividend growth lagged behind earnings growth, which reduced the importance of cash returns."

Goldman Sachs anticipates that after a narrow rise, there will be some rotation within the index in the near term.

Kostin added, "While narrow fluctuations typically signal the potential for significant declines beyond the average, we believe the likelihood of a 'rebound' is greater than that of a 'decline,' and we expect the market rebound to expand in the coming months Goldman Sachs also provided three investment recommendations at the beginning of the second half of the year:

Balance industry allocation, with a focus on increasing holdings in software and services, materials, utilities, media and entertainment, and real estate;

Alternative asset management companies, although capital market activities have improved, their performance still lags behind;

Companies with high floating rate debt, whose earnings expectations have improved due to lower bond yields