Trump’s Tax Cuts to Propel S&P 500 Earnings by 20%, Goldman Sachs Predicts

 

Goldman Sachs strategists believe that S&P 500 earnings per share (EPS) are on track to increase by approximately 20% over the next two years.

They forecast full-year 2024 S&P 500 EPS at $241, with an 11% rise in 2025 and a 7% increase in 2026, reaching $288 per share. However, the bank noted that these targets could be exceeded if President-elect Trump cuts corporate taxes, raising the upside potential of their forecast.

Goldman cited tax reform as a key risk factor, stating that Trump's proposal to lower the corporate tax rate from 21% to 15% could boost S&P 500 EPS by nearly 1% for every 1 percentage point reduction. Additionally, relaxing financial sector regulations could further improve earnings.

Stocks surged sharply after Trump secured a second term, with Bank of America reporting a $20 billion inflow into US stocks, the largest single-day buying spree in five months. However, Goldman also warned that Trump's planned tariffs could hurt corporate profits, estimating that a 5% increase in tariff rates could reduce S&P 500 EPS growth by up to 2%.

While Goldman sees a 40% chance of Trump implementing his blanket 10%-20% tariffs on US imports, they caution that such measures could potentially hurt earnings through reduced consumer spending, retaliatory tariffs on US exports, and heightened uncertainty, even if companies can pass some costs onto customers, as seen during the 2018-2019 trade war.

In the long run, Goldman forecasts a decade of modest S&P 500 returns, influenced by rising interest rates, stretched valuations, and high market concentration.

 

 

 

 

 

 

 

 

 

Paraphrasing text from "Bussiness Insider"all rights reserved by the original author.