The stock market is in for another strong year in 2018 so long as Congress is able to pass tax reform, according to a Goldman Sachs forecast.
With tax reform, the S&P 500 should close next year at 2,850, a healthy 10.4 percent gain from Monday's close, the Wall Street investment banking giant said in a look ahead released Tuesday. Should Congress fail to get a bill through, that outlook dims considerably, with an expected level of 2,450, which would represent a 5 percent pullback.
The prediction represents a considerably more bullish tone for Goldman, whose chief U.S. equity strategist, David Kostin, has been reserved in his expectations. In fact, the firm had predicted the S&P 500 to close 2016 at just 2,400, a mark it passed in late May and never looked back.
That brighter view also comes days after the firm's economists released their own buoyant projections for the year ahead, with expectations for greater growth both in the U.S. and globally and a domestic unemployment rate at its lowest level since 1969.
"Our 'rational exuberance' rests on a combination of above-trend US and global economic growth, low albeit slowly rising interest rates, and profit growth aided by corporate tax reform likely to be adopted by early next year," Kostin said in a report for clients.