Goldman Sachs is out with its official 2024 outlook. Here's where it sees stocks going

Published Wed, Nov 15 202311:03 AM EST

Goldman Sachs just came out with its official 2024 outlook — and has a message penned by Taylor Swift for investors. The Wall Street firm expects the S & P 500 will end next year at 4,700 , which equates to roughly a 5% increase from Tuesday's close. Including dividends, the firm anticipates a total return of 6%. The bank also thinks the U.S. will dodge a recession and continue to expand, albeit modestly, with earnings rising by 5%. For investors, the forecast means it would be best to stay put from now through the end of next year, according to chief U.S. equity strategist David Kostin said. The strategist penned his 2024 outlook after Swift's "All You Had To Do Was Stay" — a song from the singer-songwriter's "1989" album. "The Eras tour will conclude in late November 2024, roughly corresponding to the 12-month horizon of the market forecast in this report. As homage to the global icon, our 2024 US Equity Outlook is subtitled 'All You Had To Do Was Stay' – invested," Kostin wrote. "The title of the song from Taylor Swift's 1989 album reflects our baseline forecast that despite intermittent volatility, fund managers will ultimately be rewarded for staying invested through the end of next year," Kostin added. Here are the other key forecasts: Limited appreciation for equities While the S & P 500 could climb to 4,700, the strategist expects the index will remain "slightly below" its January 2022 all-time closing high of 4,796.56. Kostin expects a flat market in the first half of the year, with gains focused in the second half of the year after uncertainty around interest rate hikes from the Federal Reserve and the latest U.S. election is lifted. The strategist expects rate cuts in the fourth quarter of next year. "Resilient economic growth in the beginning of the year will force the market to push back its current pricing that Fed cuts will begin in 2Q, and US election uncertainty will suppress risk appetite," Kostin wrote. "Later in the year, the first Fed cut and resolution of election uncertainty will lift US equity prices." 'Magnificent 7' to continue outperforming The top seven megacap stocks that outperformed in 2023 will continue beating the broader market in 2024 given their faster sales growth, greater margins and stronger balance sheets. However, Kostin noted that "the risk/reward profile of this trade is not especially attractive given elevated expectations." Kostin advised investors to focus on "more attractive" opportunities in the index. He recommended three strategies for equity investors: buy quality stocks, own growth names with a high return on invested capital (ROIC), and invest in beaten-down cyclicals.