The Federal Reserve lowering its benchmark interest rate last week has Goldman Sachs more excited about stocks heading into the final quarter of the year. Strategist David Kostin raised his 2025 S & P 500 target to 6,800 from 6,600. That signals upside of 2% from Friday's close of 6,664.36. The S & P 500 has been on a tear this year, rising more than 13% as the artificial intelligence boom continues to drive up share prices and earnings expectations. Now that the Fed has restarted its easing campaign, Goldman sees more upside ahead for equities. "Our economists expect two additional 25 bp cuts to the policy rate this year and two 25 bp cuts in 2026, roughly in line with market expectations," Kostin wrote in a note to clients, referring to quarter-point moves in the fed funds rate. "With our baseline economic and Fed forecasts largely reflected in market pricing, we expect earnings will continue to be the primary driver of equity prices from here. However, light investor positioning adds to the tactical upside case for stocks if the macro backdrop remains friendly." .SPX YTD bar SPX year to date "Equity valuations are elevated relative to history but appear close to fair value based on the underlying macroeconomic and corporate fundamental backdrop," the strategist added. The S & P 500 last week hit an all-time high of 6,671.82. Tech has been the stalwart, with the sector soaring more than 28% this year. However, signs of market froth have emerged. While AI leader Nvidia is up 31% in 2025, Paramount Skydance has soared more than 80% during that time. On top of that, more than 120 S & P 500 stocks are up at least 20% year to date. The S & P 500's relative strength index, a measure of whether an asset is overbought or oversold, recently sat at 73, indicating the benchmark is overbought and may be susceptible to a decline. But the bulls appear to be in control for now. JPMorgan's trading desk, for example, maintained its tactical bullish call on the S & P 500, calling for the index to reach 7,000 by year-end. "That said, we may see some choppiness along the way, first from a combination of quarter-end rebalancing then around earnings, and finally with the macro releases. We feel any pullback should be bought into year-end," the desk said. ( Learn the best 2026 strategies from inside the NYSE with Josh Brown and others at CNBC PRO Live. Tickets and info here . )
