Goldman Sachs (NYSE:GS) believes that the Federal Reserve will initiate three quarter-point reductions this year, starting in September. One rate cut is expected in October and December, each due to tariffs not having as big of an impact on inflation and the labor market softening.
Plus, they believe that the stock market will rally leading up to those rate cuts. The S&P 500 is expected to see even more gains after reaching an all-time high.
GS stock itself also followed the index and reached an all-time high. Now that Goldman Sachs sees the S&P 500 rally continuing through August, could GS stock follow suit and hit $1,000?
GS stock is up over 17% in just the past month alone and has undone the correction this spring that most stocks went through. The recent momentum is due to the Fed saying that U.S. banks were healthy enough to withstand recessions and that they all passed stress tests. The results were better this year compared to 2025, and many banks expect that capital buffers will ease going forward.
Moreover, investors expect a big dividend hike this year from Goldman Sachs after the stress test. Last year in July, the company hiked its dividends by 9.1%. An even bigger increase may happen this year.
The stress test results have been strong, and with a likely dividend increase ahead, GS looks like a buy. Big banks are well-positioned to ride out any volatility, and they may even benefit from it like they did in 2023. Easing buffers would also give it a boost.
Still, I do not think $1,000 is possible. The earnings multiple at the moment is over 16.4 times, compared to 12.4 times historically. The financials are a bit better at the moment, but GS stock could still decline well over 30% if the broader market turns bearish earlier than expected.
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