Goldman Sachs Raises S&P 500 Outlook: “Driven by Fed Rate Cuts and Strength of Large-Cap Stocks”

Goldman Sachs, one of Wall Street’s leading investment banks, has become more optimistic about the U.S. stock market. In a recent report, Goldman Sachs raised its three-, six-, and twelve-month return forecasts for the S&P 500, citing potential interest rate cuts by the U.S. Federal Reserve (Fed) and continued fundamental strength in major large-cap stocks as the key drivers behind its positive outlook.

According to the revised forecast, Goldman Sachs expects the S&P 500 to climb 3% over the next three months to reach 6,400 points. Over six months, the index is projected to rise to 6,600 points, and over twelve months, to 6,900 points—representing gains of 6% and 11%, respectively. These figures mark upward revisions from the bank’s previous projections.

Goldman Sachs analysts noted, “There’s an increased likelihood that the Fed will cut rates earlier and more significantly than previously expected, and bond yields are likely to remain lower than we anticipated. The fundamental strength of large-cap stocks remains intact, and investors seem less concerned about potential near-term earnings weakness.” Accordingly, the bank raised its forward price-to-earnings (P/E) ratio forecast for the S&P 500 from 20.4 times to 22 times.

Notably, Wall Street reached record highs last week as stronger-than-expected U.S. labor market data eased concerns over an economic slowdown. In April, the market had tumbled following former President Donald Trump’s “Liberation Day” tariff announcements, but stocks rebounded amid renewed hopes for trade deals and potential Fed rate cuts.

Analysts commented, “Recent inflation data and corporate surveys show that the pass-through impact of tariffs to consumer prices has been less than we expected so far. However, we believe that the adjustment to tariffs will be a gradual process, and large-cap companies appear to have some buffer through existing inventories ahead of the tariff increases.”

Goldman Sachs has maintained its earnings-per-share (EPS) growth forecast for S&P 500 companies at +7% for both 2025 and 2026. However, the analysts cautioned that risks remain on both the upside and downside and said they would reassess their estimates following the second-quarter earnings season.

Market Update as of July 2025

As of July 2025, the market remains highly focused on the timing and extent of potential Fed rate cuts. The U.S. Consumer Price Index (CPI) for June rose 2.5% year-over-year, lower than the expected 2.7%, fueling speculation that the Fed could initiate its first rate cut as early as September. Recent Fed meeting minutes also revealed that many policymakers believe gradual rate cuts could be possible if inflation continues to stabilize, further boosting market optimism.

Meanwhile, strong earnings from major companies in sectors like AI, cloud computing, and semiconductors continue to drive the market. In particular, big tech names like Nvidia, Microsoft, and Apple have posted strong results again last quarter, helping push the S&P 500 higher.

Goldman Sachs stated that if this momentum continues, the S&P 500 could even surpass 7,000 points by the end of 2025. However, the firm also cautioned that risks remain, including ongoing tensions between the U.S. and China, geopolitical uncertainties, and rising cost pressures for businesses.

Experts emphasize that upcoming second-quarter corporate earnings reports and the Fed’s September FOMC meeting will be key factors in determining the market’s future direction.

Personal Market View

Personally, I remain optimistic about the U.S. stock market. Of course, there may be short-term volatility due to tariff issues, political risks, and uncertainty around the Fed’s pace of rate cuts. However, I believe the fundamental drivers for market growth are still firmly in place.

In particular, ongoing investment in innovative sectors like AI, semiconductors, and cloud computing is sending consistently positive signals. Companies like Nvidia, Microsoft, and Apple aren’t just “theme stocks”; they’re generating real revenue and profits, continuing to lead the market. I believe this trend will remain a key support for the market going forward.

Moreover, with inflation showing signs of stabilizing and the Fed taking a cautious approach aimed at avoiding a recession while controlling prices, the market has room to hope for a “soft landing.” This environment is helping restore investor confidence and fueling a more positive outlook.

While there’s certainly a chance the S&P 500 could see short-term corrections, I believe such periods could present new buying opportunities rather than major cause for concern. The 7,000-point scenario suggested by Goldman Sachs doesn’t seem far-fetched to me. Of course, there’s never a guarantee in investing, but I still believe the U.S. stock market offers plenty of opportunities.

I’ll be closely watching the upcoming Q2 earnings season and the Fed’s decisions in the fall to gauge how the market might evolve from here.