Goldman Sachs said severe disruptions to oil supplies from the ongoing Middle East conflict could push the S&P 500 index down to nearly 5,400 this year, or about 19 per cent below current levels.
In a scenario where there is a “moderate” US economic growth shock, Goldman expects the index would fall to 6,300, nearly down 5.0 per cent from current levels. The index last closed at 6,632.19 on Friday.
The AI investment boom should offset the drag from modestly weaker economic activity, the brokerage added.Outside the Middle East conflict, Goldman expects the uncertainty surrounding the impactof AI to weigh on index valuations.
Factoring in AI uncertainty, Goldman lowered its year-end S&P 500 forward price-to-earnings (PE) ratio to 21 from 22 earlier.
Under scenarios where growth is ‘moderate’ and oil supply shock ‘severe’, PE ratio could drop to 19 and 16, respectively, the brokerage added.“The baseline outlook for US equities remains constructive, but the war in Iran adds to the downside risk posed by elevated valuations,” Goldman said.
It retained its year-end forecast for the benchmark index at 7,600.Earlier this month, Goldman said it sees near-term “correction risks” for global stocks on geopolitical worries, AI disruption and elevated valuations.
