Goldman Sachs lowered its S&P 500 2022 target by nearly 16% to 3,600 points as the U.S. Federal Reserve shows no indications of reversing its aggressive rate-hike policy.
Late on Thursday, Goldman Sachs analysts noted in a report that the central bank’s anticipated path for interest rates is currently more optimistic than anticipated. 4,300 points was their prior goal.
The key index most recently closed at 3,758 points.
The majority of equity investors have adopted the belief that a hard landing scenario is unavoidable, according to client conversations, and their attention is now focused on the timing, severity, and length of a potential recession as well as investment strategies for that outlook, according to Goldman analyst David Kostin.
The Fed increased U.S. interest rates by 75 basis points for the third time in a row on Wednesday and hinted that borrowing costs will continue to rise this year. The Fed also said that officials around the world would “keep at” their fight to contain inflation.
Kostin pointed out that forecasts of the Fed tightening have increased as a result of the fact that inflation has proven to be more persistent than anticipated and is unlikely to show significant signs of easing in the near term.
August saw an unanticipated increase in monthly consumer prices in the US.
The majority of portfolio managers, he continued, “think that the Fed will have to raise rates so high that it will cause a U.S. recession at some time during 2023 in order to corral inflation.
UBS reduced its S&P 500 year-end target for 2022 to 4,000 points earlier this month.
Rate increases that were announced overnight in the UK, Switzerland, and Norway, as well as those that were announced on Thursday in Asia in the Philippines, Indonesia, and Taiwan, are expected to depress market confidence in the area.
The Federal Reserve has made it clearer than ever that it is prepared to endure a recession as the necessary trade-off for regaining control of inflation by foreseeing an extra 1.25 percentage points of tightening by the year’s end.
