Goldman Sachs says it's optimistic the US stock market sell-off is almost over and keeps its 3,600 year-end target for the S&P 500

• The S&P 500 should still hit 3,600 by the end of the year despite the recent tech-sell off, Goldman Sachs said on Friday.
• "We still expect the market will rise to 3600 at year-end 2020 (+8%) and 3800 at mid-year 2021 (+14%) driven by improving earnings prospects and a declining risk premium," a team led by David Kostin said.
• The analysts pointed to Good Judgment superforecasters' 68% probability of a widely distributed coronavirus vaccine by the first quarter of 2021, up from about 40% three weeks ago.
• The bank said last month that the S&P 500 would hit 3,600 by year-end, but a recent tech sell-off brought into question whether stocks would tip lower.
• The bank also said a vaccine would likely increase earnings-per-share estimates, "particularly for cyclicals."
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The S&P 500 should still reach 3,600 by the end of the year despite a recent stock-market sell-off, Goldman Sachs said Friday.

In a note, analysts led by David Kostin said they expected the S&P 500 to be at 3,600 by year-end and at 3,800 by mid-2021, supported by hopes that a vaccine will be widely distributed by the first quarter of 2021.

The S&P 500 closed just shy of 3,341 on Friday. The index has lost 5% since touching an all-time high of 3,520.25 at the end of August.

A sell-off in big tech firms like Tesla led the index to close 2.5% lower last week, marking its largest weekly fall in three months.

"Despite the sharp sell-off in the past week, we remain optimistic about the path of the US equity market in coming months," Goldman Sachs said. "The Superforecaster probability of a mass-distributed vaccine by 1Q 2021 has surged to nearly 70% and economic data show a continuing recovery."

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Goldman is by far the most bullish investment bank on Wall Street; it predicted last month that the index would hit 3,600 if markets priced in a "comparatively more optimistic US GDP forecast."

The bank on Friday upgraded its third-quarter US GDP forecast to an expansion of 35% after a stronger-than-expected August jobs report.

"We still expect the market will rise to 3600 at year-end 2020 (+8%) and 3800 at mid-year 2021 (+14%) driven by improving earnings prospects and a declining risk premium," Goldman said.

Goldman said that despite this week's "setback in one clinical trial," superforecasters at Good Judgement had estimated the probability of a mass-distributed coronavirus vaccine by the first quarter of 2021 at 68%, up from about 40% three weeks ago.

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The Anglo-Swedish pharma group AstraZeneca was forced to halt its vaccine trial with Oxford University last week when one participant fell ill but resumed over the weekend.

Goldman Sachs also said expectations that a vaccine will be delivered early next year is the key reason it expects US GDP growth of 6% next year versus a consensus estimate of 3.9%.

The bank has a top-down 2021 S&P 500 earnings-per-share forecast of $170, which it said was above the bottom-up consensus of $165, compared with EPS in 2019 of $165.

It said that EPS sentiment had been positive since June but that revisions to 2021 earnings had "stalled" in the past month.

Morgan Stanley said last week that guidance on company earnings had become more unpredictable than ever.

But Goldman Sachs concluded that "a vaccine would likely catalyze another move higher in EPS estimates, particularly for cyclicals."

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