Goldman Sachs Projects S&P 500 to Reach 6,200 in Year-End Rally

TLDR:

• Goldman’s Scott Rubner predicts S&P 500 will reach 6,200 points in year-end rally starting this week
• US equities saw $105 billion in inflows over past three weeks – one of largest monthly inflows on record
• Corporate buybacks estimated at $960 billion for 2024, with strongest activity in November-December
• Retail investors showing increased market participation, leveraging high year-to-date gains
• Historical data supports December gains, especially during election years

Goldman Sachs technical strategist Scott Rubner expects a robust year-end rally for US equities, with projections indicating the S&P 500 could reach 6,200 points. The forecast comes as market data reveals substantial capital movement, with US equities receiving $105 billion in inflows over just three weeks.

The rally’s timing aligns with historically favorable market conditions, particularly during election years. December has traditionally shown strong performance, with the upcoming holiday trading season typically featuring some of the year’s most profitable trading days leading up to Thanksgiving.

Market dynamics show a clear shift in investor behavior, with retail participants increasingly active and leveraging their existing gains. This retail enthusiasm extends across both traditional equities and cryptocurrency markets, suggesting broader market confidence.

Corporate buyback activity remains a key market driver, with Goldman estimating $960 billion in share repurchases for 2024. November and December typically represent the strongest two-month period for buybacks, potentially providing additional market support during lower-liquidity holiday trading periods.

A notable rotation from large-cap technology stocks to smaller-cap and value-driven sectors is currently underway. The “Magnificent 7” tech stocks, which represent 31.71% of the S&P 500 index weighting, have seen some selling pressure as investors diversify into financials, industrials, and energy sectors.

The market has demonstrated consistent strength, with US stocks recording inflows for seven consecutive weeks. This contrasts with European and emerging market funds, which continue to experience outflows, highlighting the relative attractiveness of US equities to investors.

These inflows have been particularly strong from retail investors, who are leveraging their high year-to-date gains. The combination of retail participation and corporate demand creates a supportive environment for continued market strength.

Historical patterns since 1928 suggest that November consolidation phases often precede rallies extending into early January. This seasonal pattern has been especially pronounced during election years.

Looking ahead to early 2025, Rubner anticipates the January effect will further boost market momentum. This phenomenon typically occurs as new capital enters the market, potentially compelling sidelined investors managing large retirement portfolios to rotate into underperforming sectors.

The S&P 500 has gained 3.2% since November 5, while the Russell 2000 Index has climbed 6.5%. These gains align with typical election-year patterns, where market rallies often extend into January before moderating near inauguration day.

Rubner specifically notes that the holiday trading period includes some of the year’s best trading days, suggesting increased potential for positive market movement in the coming weeks.

The selling of US tech heavyweights, while putting temporary pressure on the market, may create opportunities in other sectors as investors rebalance their portfolios heading into year-end.

Market technicals appear supportive, with the combination of strong inflows, seasonal patterns, and corporate activity creating favorable conditions for continued upward movement.

The rotation from tech leaders into broader market sectors suggests a healthier market environment, with gains potentially spreading across a wider range of stocks and sectors.

Current market conditions, including low volatility and steady inflows, provide a foundation for Rubner’s optimistic outlook, leading him to notably state, “I placed my order for an SPX 7K hat.”