"After sinking in 2022, the S&P 500 rallied 25% in 2024 and 18% in 2025. Evidently, investors are confident that the Federal Reserve's interest rate hiking cycle from 2022 is now in the rear-view mirror. Indeed, Goldman Sachs analysts cited "Fed easing" as a factor that they believe will "help propel the US stock market this year." The Goldman Sachs analysts reported that, as of January 6, economists projected two 0.25% interest rate cuts for 2026."
"On the other hand, funds like SPY and VOO seem to have already gotten a big boost based on interest rate cut assumptions. Besides, the Goldman Sachs analysts seemed to suggest that there's no guarantee of rate cuts this year. Thus, the analysts cited a potential "hawkish shift by the Fed" as one of the "biggest risks to an equity market rally." Yet, Ben Snider, chief U.S. equity strategist with Goldman Sachs, assured that such a "hawkish shift" isn't "likely in the near future.""
Many investors access S&P 500 exposure through ETFs such as SPY and VOO. Goldman Sachs strategists are bullish on large-cap U.S. stocks and set an S&P 500 price target that supports further investment consideration. The strategists cite expected Fed easing as a tailwind, noting economists projected two 0.25% cuts for 2026 as of January 6. The S&P 500 rallied strongly in 2024 and 2025, reflecting confidence that the 2022 hiking cycle has ended. Goldman Sachs identifies a potential hawkish shift by the Fed as a major risk, though such a shift is deemed unlikely in the near term.
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