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S&P 500 to rise 8% over next 12 months: Goldman Sachs

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S&P 500 to rise 8% over next 12 months: Goldman Sachs

America’s benchmark gauge, the Standard and Poor’s 500, will rise 8 percent over the next 12 months on the strength of broad economic growth, according to Goldman Sachs Group Inc (NYSE:GS) . According to David Kostin, Goldman’s chief US equities strategist, investors should buy into companies that generate most of their revenues domestically.

Goldman’s prediction comes at the heels of the S&P’s worst performance in nearly two months, which was triggered by mounting concern over a Federal Reserve bond taper in September. The S&P was pushed off its record high of 1,709.67 last week on growing Fed speculation, which extended into the current week. The S&P hit a low of 1,673.89 ahead of Tuesday’s session, where it rebounded more than a quarter percent to 1,694.16. Goldman expects the benchmark gauge to climb as high as 1,825 over the next 12 months.

In related news, the NASDAQ Composite advanced almost 0.4 percent to 3,684.44, and the Dow Jones Industrial Average posted a gain of 0.20 percent, closing at 15,451.00.

Broadening US recovery is the backbone of Goldman’s forecast. Higher interest rates are a reflection of a stronger economy, and given the trajectory of US recovery over the past year, a shift in monetary policy is almost certain to occur this year. A report by the US Census Bureau Tuesday showed retail sales increased for a fourth consecutive month, a sign consumers are spending more as employment climbs. Later in the week market participants will determine whether the US is indeed headed closer to higher interest rates when the Department of Labor Statistics releases the July annualized Consumer Price Index, a key measure of inflation.

Year-to-date, the S&P 500 has advanced almost 16 percent. US stocks received a boost over the summer when second quarter profits outperformed expectations by a wide margin. Over 70 percent of the S&P 500 companies to report second quarter profits beat analysts’ expectations. According to Goldman, the S&P will hit 1,900 by the end of 2014.

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