Goldman Sachs lowers its year-end target for the S&P 500 index from 6,500 to 6,200 points. However, Goldman Sachs states that if the economy and earnings continue to grow, history suggests that pullbacks are usually good buying opportunities. The firm advises investors to hold “non-sensitive” stocks, focus on discounted stocks due to hedge fund position adjustments, and for those concerned about the risk of economic recession, to hold stocks with stable growth.

The recent U.S. stock market seems to be going through a “nightmare” for the “Big Seven” tech giants, with the S&P 500 index nearing correction territory as a result, prompting Goldman Sachs to lower its year-end target for the index.

On March 11th, Goldman Sachs analysts David J. Kostin, Ben Snider, and Ryan Hammond released their latest research report, reducing the year-end target for the S&P 500 INDEX(SPX.US) from 6,500 points to 6,200 points. However, Goldman Sachs indicated that if the economy and earnings continue to grow, historically, pullbacks in the S&P 500 index are often good buying opportunities.

The “Big Seven” Curse: From “Dominance” to “Faded Power” 

In the past three weeks, the S&P 500 index has fallen 9% from its historical high, with more than half of the decline attributable to a 14% price plunge in the stocks of the “Big Seven” tech giants. Last year, the “Big Seven” accounted for 25% of the total return of the S&P 500 index.

It is noteworthy that in the past 40 years, the market capitalization-weighted index has experienced an annual median retracement of 10%, which is close to the recent decline. However, the equal-weight index (SPW), which represents the average stock, has fallen 6% in the past three weeks and is 8% below the historical high set at the end of November last year. Analysts point out:

“The direct causes of the market decline are increased policy uncertainty related to tariffs, concerns about economic growth prospects, and investor position adjustments, particularly hedge fund portfolio reallocations.”

Goldman Sachs has lowered the year-end target for the S&P 500 index to 6,200 points from 6,500 points for the year 2025. Although the target has been reduced, Goldman Sachs still expects an 11% upside for the S&P 500 index for the remainder of the year, similar to the earnings forecast at the beginning of the year, but with a lower starting point.

Furthermore, Goldman Sachs has also lowered their growth forecast for Earnings Per Share (EPS) for the year 2025 from 9% to 7%, but maintained a 7% growth forecast for 2026. The new EPS forecasts are $262 (previously $268) and $280 (previously $288), respectively.

Coping in a Recession Scenario: 

Goldman Sachs’ Investment Strategy Goldman Sachs believes that for the market to recover, at least one of the following three conditions must be met: Firstly, an improvement in the outlook for U.S. economic activity, which could stem from better growth data or changes in tariff policy; secondly, the valuation of stocks or cyclical stocks versus defensive stocks is already far below Goldman Sachs’ base case forecast; and thirdly, investor positioning is already low.

Goldman Sachs’ report also focuses on the potential impact of an economic recession on the U.S. stock market. They note that since World War II, during the 12 economic recessions, the S&P 500 index median earnings per share (EPS) decline was 13%. Typically, the index falls by 24% from its peak during periods of economic recession. However, when the economy is not in recession, history indicates that a decline in the S&P 500 index is a good buying opportunity if economic growth and earnings continue to increase, which aligns with Goldman Sachs’ base case assumption.

Goldman Sachs also offers three strategies:

Investors should hold “non-sensitive” stocks, which are not significantly affected by the main drivers of market volatility, and demonstrate the lowest sensitivity to U.S. economic growth, trade policy risks, and market pricing of artificial intelligence.

Investors should consider stocks that have been impacted by hedge fund position adjustments and are trading at discount valuations.

Investors who are concerned about the risk of economic recession should hold stocks with stable growth.