On October 16, Caixin Media (edited by Huang Junzhi) Goldman Sachs analysts said in a report on Tuesday that after a brief summer hedge, risk preference sentiment has returned, which will support the U.S. stock market in the coming months.

They wrote that the U.S. stock market will offer more attractive returns than bonds because the economy supports higher risk in the late-cycle environment. Goldman Sachs pointed out that in the late stages of an economy approaching its peak and policy easing, it is generally favorable for risk assets unless growth momentum slows or inflation accelerates tightening policies.

The bank's analysts stated that in the recent months, the situation is quite the opposite, with accelerated U.S. economic growth, eased inflation, strong economic data, and loose policies fostering an environment more supportive of risk.

In the latest report, in July, after concerns about the stock market pulling back due to bullish sentiment and slowing growth momentum, the bank downgraded its rating on U.S. stocks to neutral and upgraded bonds to neutral, but U.S. stocks rebounded quickly afterwards.

"After the summer 'hedge', due to the Fed's moderate policy adjustments and better-than-expected U.S. economic data, risk assets rebounded rapidly," they wrote. Goldman Sachs analysts have now raised their rating on U.S. stocks to shareholding and explained that global stock markets currently face lower risks.

Goldman Sachs pointed out that as long as the economy avoids recession, the overall tendency of the Fed rate cut cycle is to support risk assets. They predict that with strong labor market data and the Fed's significant 50 basis points rate cut last month, the risk of a recession seems low, with the probability of a recession next year dropping to 15%.

Analysts also stated that this risk preference and late-cycle background mean that as bonds face downside risks, the stock market will benefit from higher profit growth and valuations. At the beginning of this month, Goldman Sachs's chief stock strategist David Kostin raised the 12-month target price for the S&P 500 Index to 6,000 points.

Coincidentally, ​ubs group analysts are also bullish on US stocks. On Tuesday, they raised the ​s&p 500 index's target price at the end of the year from 5,600 points to 5,850 points, while raising the expected target for 2025 from 6,000 points to 6,400 points. This is the fourth time ​ubs group strategists have raised the target price of the index since the end of last year when they released their annual outlook.

​bank of montreal strategist, Brian Belski, is the most optimistic in year-end forecasts, previously stating that the index could soar to 6,100 points by the end of this year.

However, goldman sachs added in the above report that despite the current environment supporting higher-risk investments, market volatility could still occur due to geopolitical conflicts, the US elections, as well as adverse trends in economic growth and inflation.

But they stated that even this uncertainty could push up risk assets.

"We believe that a resolution to uncertainty could also support high-risk assets by the end of the year - that's why we prefer to selectively hedge long positions rather than maintain a neutral stock strategy," they wrote.

Editor / jayden