Goldman Sachs internal bullish sentiment is rising! Consensus calls for US stocks to continue rising after the election

According to the financial news app Zhitong Finance, David Kostin, Chief U.S. Equity Strategist at Goldman Sachs, stated that once the results of the U.S. presidential election are determined, it is clear that the U.S. stock market will continue to rise. He expects the S&P 500 index to trade around 6000 points in a year. This forecast implies a 5% increase from Tuesday's closing level, while the index has already risen by about 20% so far this year.

However, David Kostin also mentioned that as the U.S. presidential election enters its final stage, investors may have to experience some market volatility in the coming weeks. He noted that historically, this is a period of increased volatility and declining stock prices. He said, "There is uncertainty surrounding the election, so in the short term, there will be some concerns." "This usually gets resolved after the election. Therefore, over time, the stock market tends to rebound after the election."

Since releasing his 2024 forecast at the end of last year, David Kostin has raised his forecast for the S&P 500 index three times. He reiterated his year-end target of 5600 points for the S&P 500 index, citing expectations of near-term volatility due to the U.S. presidential election. Currently, Wall Street analysts have an average year-end target for the S&P 500 index around 5523 points.

David Kostin sees opportunities in mid-cap stocks, pointing out that the "long-term performance" of mid-cap stocks is better than that of large-cap and small-cap stocks, with lower P/E ratios and higher value. He also noted that mid-cap stocks have performed well in the 3 months and 12 months following rate cuts. He said, "We are most focused on mid-cap stocks right now, as mid-cap stocks are the least focused area in the market by many portfolio managers." "This is an area that could really shine in the coming year."

David Kostin believes that strong corporate earnings will be the main driver of the stock market in the coming months. He also believes that concerns about weakening trends in the job market have been exaggerated. Goldman Sachs economists attribute the recent rise in the U.S. unemployment rate mainly to an increase in labor supply and temporary friction caused by new immigrants, rather than a sudden drop in labor demand.

Last week, David Kostin and his team also stated that the slowdown in labor cost growth is a positive sign for corporate profit margins and will have a positive impact on U.S. stocks, especially for companies with high labor costs.

Meanwhile, Scott Rubner, Managing Director of the Global Markets Division at Goldman Sachs, stated earlier this week that U.S. stocks are expected to rebound before the end of the year, but will rebound only after facing unfavorable short-term situations such as technical positioning, fund flows, and pre-election anxiety. In a client report last Friday, Scott Rubner said, "Tactically, I am negative on the quarter end, but the target is for the S&P 500 index to rebound before the end of the year."

Scott Rubner mentioned that as the U.S. election approaches, institutional investors are selling favored long positions and buying S&P 500 put options spreads to hedge potential losses. He expects more selling to come from hedge funds, which still have high risk exposure in the election but typically reduce positions before the vote. More importantly, trend-following systematic funds are positioned long for the next five trading days, and if market sentiment turns negative, Commodity Trading Advisors (CTAs) are expected to sell $47 billion worth of U.S. stocks next month Scott Rubner pointed out that the recent trend will be volatile trading, falling stock prices, and increased volatility. He believes that after the election, the situation will change, and regardless of who wins, the S&P 500 index will see an end-of-year rebound under the "fear of missing out (FOMO)" sentiment, with the index rising to 6000 points by the end of the year. He stated that investors may chase risk assets in November and December, reallocating cash in their portfolios to stocks.

Scott Rubner stated that since 1900, the median return of the S&P 500 index in November and December of election years has been 3.4%. He also expects that once the election results are finalized, the breadth of the stock market will improve, with inflation-sensitive stocks as well as value stocks, energy stocks, and emerging market stocks outperforming the broader market