Goldman Sachs cuts its 2022 S&P 500 target by 16%

Sep 23 – Goldman Sachs cut its end-2022 benchmark S&P 500 index target by around 16% to 3,600 as the US Federal Reserve is showing little sign of backing down from its aggressive policy of interest rate hikes.

Goldman Sachs analysts wrote in a note late on Thursday that the central bank’s expected rate path is now higher than its previous estimate. His previous target was 4,300 points and the S&P 500 index last closed at 3,758 points.

“Based on discussions with our clients, most equity investors have adopted the view that a hard landing scenario is inevitable and their focus is on the timing, magnitude and duration of a potential downturn and the investment strategies for that perspective,” wrote David Kostin, an analyst at Goldman.

The Fed signaled on Wednesday that global monetary policymakers will “continue” to struggle to reduce inflation, raising rates by 75 basis points for the third consecutive time, signaling that the cost of borrowing will continue to rise this year.

Kostin noted that inflation turned out to be more persistent than expected and is unlikely to show clear signs of easing in the short term, leading to further estimates of Fed tightening.

“Most portfolio managers believe that, to rein in inflation, the Fed will have to raise rates enough to trigger a US recession sometime in 2023,” he added.

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