Goldman Sachs sees the S&P rallying to a record next year.

The firm's equity strategy team, led by David Kostin, raised its 2024 year-end target for the S&P 500 (^GSPC) to 5,100, on the back of softer-than-expected inflation and a resilient consumer. Kostin's initial outlook saw the benchmark index ending the year at 4,700.

"Above-consensus retail sales growth further evidenced economic resilience, while lower-than-expected jobless claims affirmed that the labor market remains healthy," Kostin's team wrote in a note to clients Monday.

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Video Transcript

SEANA SMITH: Well, the Federal Reserve's dovish pivot has Wall Street feeling a bit more optimistic about where we're headed in 2024 after Fed officials signaled that three interest rate cuts for 2024 could be likely in their dot plot. We have Goldman Sachs Chief US equity strategist, David Kostin.

Well, he's out with a new call on the S&P for next year. He raises S&P 500 forecast to 5,100 by the end of 2024. Now, that's up from his previous call of 4,700 just a month ago. And Brad, we have certainly seen this risk on rally that seems to be really driving the markets over the last several weeks, you can say just in anticipation of this pivot that we could have gotten here from the Fed.

Although we do need to point out that Fed Chair Jay Powell was very quick to couch just in terms of the fact that they are still data dependent, that if, in fact, we don't make any more headway in the fight against taming inflation, they may be then forced to act. But we do see Wall Street really holding on to this optimistic view right now, very bullish about what next year could hold if, in fact, we do see the Fed eventually pivot and cut rates before year end.

BRAD SMITH: Yeah. And there you're taking a look at some of the forecasts street-wide here. And one of the huge things that Goldman particularly pointed out within their note, the stronger view of the equity market also dovetails with the colleagues upgrades to the US GDP growth, plus interest rate outlook. So exactly what you were speaking to a moment ago.

Looking forward, they also mentioned the new regime of both improving growth and then falling rates should actually support stocks with weaker balance sheets interesting, particularly those that are sensitive to economic growth. So a few of the call outs here within those conversations that they're having with clients, but largely taking a look out to next year and becoming just a little bit more bullish.

We already talked last week about how much hopium perhaps there is in the tape as of right now as we go into kind of this year end rally and have been in this year end rally mode just longer kind of question mark though as to where some of the additional catalysts are going to come from next year.

SEANA SMITH: And then, of course, the question is, what is this going to do? The deal activity, what is this going to do to the IPO outlook cost? And briefly weighing in on that just in terms of the fact that if we do see a pivot here from the Fed, if we do see lower rates that, obviously, will likely boost some of the activity that we have been waiting now for some time.

There was some hope that some of that activity was going to get a bit of a surge here in the final months of the year. That hasn't exactly come to fruition. So as we look ahead to 2024, this optimism right now more are at least bullish just about what exactly that IPO market could look like next year.