Goldman lifts S&P 500 target on lowered tariffs

Goldman Sachs has lifted its S&P 500 targets and earnings forecasts, driven by a combination of lower-than-expected tariffs, improved economic growth, and reduced recession risks.

The bank now sees the benchmark index reaching 6100 by year-end and 6500 in 12 months, up from prior forecasts of 5900 and 6200.

The Wall Street firm lifted its 2025 and 2026 S&P 500 earnings per share (EPS) growth estimates to 7% in both years, compared to earlier projections of 3% and 6%. These revised forecasts reflect “better-than-expected 1Q 2025 results and a stronger U.S. economic growth outlook in coming quarters.”

Goldman now expects U.S. real GDP to expand 1% in 2025 on a Q4/Q4 basis, double its previous estimate.

Valuations were also revised higher. The 12-month forward price-to-earnings multiple forecast was raised to 20.4x from 19.5x, with the current price-to-earnings (P/E) ratio at 21x, in the 90th percentile since 1990.

However, Goldman strategists note that “already-optimistic market pricing of the economic growth outlook,” and “uncertainty surrounding the magnitude of impending slowdown in economic and earnings growth” could limit further multiple expansion.

Investor positioning remains light, a factor Goldman views as supportive for near-term returns. The U.S. Equity Sentiment Indicator recently registered -1.5 standard deviations, a level that “typically indicates above-average S&P 500 returns during the subsequent 2-8 weeks.”

“Hedge fund net leverage and systematic fund equity exposures still register particularly low levels relative to recent history,” strategists led by David J. Kostin added.

Despite the bullish revisions, Goldman cautioned that the effective tariff rate is still expected to rise by 13 percentage points in 2025. Meanwhile, the firm lowered its 12-month recession probability to 35% from 45%.