Goldman Sachs Holds 6,500 S&P 500 Target Despite Rising Yields
Goldman Sachs is maintaining its 12-month S&P 500 target of 6,500, even as bond yields rise. The yield on the 10-year U.S. Treasury has jumped from 4% in late April to 4.43%, fueled by concerns over tariffs, inflation, and increased term premia—investors demanding higher returns for longer-term debt.
In a note released Friday, strategists led by David Kostin analyzed the impact of higher yields on equities. They forecast the 10-year yield will end 2025 at 4.5%, rising slightly to 4.55% in 2026. Goldman emphasized that for equities, the drivers and speed of rate changes matter more than the actual yield level.
Markets typically react better when yields rise due to stronger growth expectations. However, if inflation or fiscal risks are behind the increase—or if yields rise sharply in a short time—a market correction becomes more likely.
Since U.S.-China tariff tensions escalated on April 2, investors have become more focused on the connection between yields and stock returns, though Goldman notes there’s no consistent historical relationship.
Goldman expects the S&P 500’s forward P/E ratio—currently near fair value—to remain stable over the next year. Large-cap companies with long-term, fixed-rate debt are less exposed to rate volatility. Small caps, by contrast, are more vulnerable due to their reliance on shorter-term, floating-rate borrowing.
Given this outlook, Goldman continues to recommend investors prioritize companies with strong balance sheets.