Introduction

Goldman Sachs has revised its year-end target for the S&P 500 from 6,500 to 6,200, reflecting rising uncertainty in the marketplace. This shift comes after a 9% drop in the index, primarily attributed to weakness in the ‘Magnificent 7’ stocks, which Goldman has now termed the ‘Maleficent 7’.

Factors Behind the Revision

1. Market Decline & Hedge Fund Activities

• S&P 500 has plummeted 9% from its peak, driven by a 14% drop in the ‘Magnificent 7’ stocks.
• The recent downturn has resulted from:
  • Policy inconsistencies within the U.S.
  • Concerns over economic growth.
  • Unwinding hedge fund positions.

2. Adjustments in Valuation

• The P/E ratio of the ‘Maleficent 7’ has decreased from 30x to 26x.
• The equal-weighted S&P 500 index (SPW) has seen a 6% decline.
• SPW’s P/E ratio dropped from 17x to 16x, now 8% below its November peak.

3. Outlook for Earnings Growth

• Goldman has adjusted its 2025 EPS forecast to $262 from $268, reflecting a -2.2% downgrade.
• 2026 EPS estimates have also been lowered from $288 to $280 (-2.8%).
• EPS growth predictions for 2025 have been decreased to 7% from 9%.

Goldman’s S&P 500 Predictions

Despite adjusting estimates lower, Goldman anticipates an 11% price growth through year-end, asserting a cautious but positive outlook.

Stay Updated on the Market Landscape

To receive insights on earnings trends and valuations, utilize:

• S&P 500 Historical Constituents API
  Study the performance history of S&P 500 companies.

• Earnings Calendar API
  Monitor forthcoming earnings announcements for profitability trends.

Conclusion

Goldman’s revised S&P 500 target reflects heightened volatility and economic uncertainties. Nonetheless, their forecast of an 11% upside suggests potential recovery, provided macroeconomic risks stabilize. Investors must closely assess policy actions, earnings developments, and valuations in the months ahead.