SPX price prediction: David Kostin sees a 10% upside

The benchmark S&P 500 index is up 20% this year, but Goldman Sachs’ David Kostin says the next fifteen months won’t be nearly as exciting for the investors.

Kostin forecasts SPX to close 2022 at 4,900 that represents a roughly 10% upside from here.

Kostin defends his thesis on CNBC’s “Squawk on the Street”

Interestingly, Kostin expects a further upside to 4,700 by year-end, and then a modest 200 points increase only in 2022. Defending his thesis on CNBC’s “Squawk on the Street”, he said:

We’re assuming only 2.0% earnings growth next year. A lot of this muted level of earnings growth is a function of tax reforms. If we didn’t have tax reforms, we would’ve expected around 7.0% of earnings growth. So, tax reforms make up for about a 5.0% headwind in earnings growth.

The benchmark is currently trading at about 21 times forward multiple with bond yield at 1.50%. Kostin expects it to climb slightly to 1.60% by the end of the year that supports his view of 4,700 for SPX by year-end.

Lebenthal says the long-term outlook continues to be positive

Also on Thursday, Cerity Partners’ Jim Lebenthal reiterated that the long-term outlook for the U.S. stock market continues to be positive as there are more tailwinds than headwinds. On CNBC’s “Halftime Report”, he said:

The market has priced in the supply chain bottlenecks, inflation, and the congressional dysfunction. I think the Fed will continue to buy bonds and pour cash for another nine months at least. The delta has peaked too. I’m a long-term investor, and I love what I’m seeing from the cyclicals right now.

Last week, Zor Capital’s Joseph Fahmy also said the Fed will continue to provide an equity friendly environment.