Source: Golden Ten Data

Goldman Sachs said that as the Federal Reserve and the European Central Bank will cut interest rates, industrial and consumer demand will be supported, and commodity prices will rise this year.

Goldman Sachs analysts, including Samantha Dart and Daan Struyven, said in a March 24 report that raw material prices are likely to rise 15% in 2024 as borrowing costs fall, manufacturing recovers, and geopolitical risks persist. The bank said the prices of copper, aluminum, gold and petroleum products are likely to rise. The bank also emphasized that investors need to be selective because the rise is not widespread.

Commodity prices rose slightly in the first quarter, crude oil prices strengthened, gold prices hit record highs, and copper prices surpassed 9,000 US dollars per ton. Policy makers from the Federal Reserve and the European Central Bank have hinted that they intend to cut interest rates this year as inflation falls. Furthermore, China has indicated that it will further support its economic recovery. Goldman Sachs analysts said:

“We found that lower interest rates in the US in a non-recession environment would cause commodity prices to rise, boosting metals (especially copper and gold) the most, followed by crude oil. Importantly, the positive impact on prices tends to increase over time as a looser financial environment gradually becomes apparent as the driving effect of a more relaxed financial environment on economic growth. ”

Goldman Sachs's cautiously optimistic outlook echoes comments from other market watchers. Australia's Macquarie Group said earlier this month that commodities are entering a new phase of cyclical rise, driven by tight supply and an improvement in the global economy. Jeff Currie, who was the head of commodity research at Goldman Sachs and now works at Carlyle Group (Carlyle Group), also predicts that commodities will rise as the Federal Reserve cuts interest rates. Furthermore, J.P. Morgan also emphasized the upward potential of gold.

In Goldman Sachs's year-end price forecast, the price of copper is predicted to rise to 10,000 US dollars/ton, the price of aluminum is predicted to rise to 2,600 US dollars/ton, and the price of gold is expected to rise to 2,300 US dollars/ounce.

In addition to commodities, Goldman Sachs is also a high-profile singer of many US stocks.

Goldman Sachs strategists still insist that the S&P 500 (SPX) will reach 5,200 points by the end of the year, but tech giants are also likely to lead the index to a further 15% rise.

Goldman Sachs strategists led by David Kostin wrote in a report that the bank adheres to the current year-end target forecast for US stocks because the federal funds rate path and economic growth trajectory have been fully priced by the market. However, due to uncertain valuation prospects, analysts have explored potential situations other than the basic situation.

One view is that the valuations of large technology companies may continue to expand. By the end of the year, the S&P 500 index will rise to 6,000 points, and the price-earnings ratio is expected to reach 23 times. The strategists wrote: “Although optimism about artificial intelligence seems to be high, long-term growth expectations and valuations for the largest TMT stocks (computers, media, electronics, telecommunications) are still far from reaching the level of a 'bubble.'”

Goldman Sachs predicts that the S&P 500 could reach 6,000 points

The S&P 500 is up nearly 10% this year and closed at 5234.18 points last Friday. This has dwarfed many strategists' year-end predictions. Healthy US economic data, expectations that the Federal Reserve will cut interest rates, and optimism about artificial intelligence stocks are all factors driving the index's rise.

Goldman Sachs pointed out that a large part of the market is still being suppressed by concerns that “high interest rates will persist for a long time” and high capital costs, which may reverse the momentum that pushes US stocks to continue to rise. “Changing interest rate prospects while the economy does not deteriorate is a necessary condition for expanding market gains,” the strategists said.

Goldman Sachs also predicted the likely direction of the S&P 500 index in several other situations. One such situation is “catching up” with the 2018 valuation, which could take the index to 5,800 points by the end of the year. The other two situations are far more pessimistic: one is to “make up for the fall,” where sales growth expectations have proven to be too optimistic; the other is that investors are starting to price the risk of a recession. The strategist said that these two situations could cause the S&P 500 index to drop to 4,500 points at the end of the year.