Goldman Lowers S&P 500 Forecast 29 Percent, Sees Gain

By Adam Haigh and Elizabeth Stanton

Oct. 13 (Bloomberg) -- The Standard & Poor's 500 Index will rise 11 percent to end the year at 1,000, Goldman Sachs Group Inc. strategists predicted, a level 29 percent lower than their previous forecast for the benchmark gauge of U.S. equities.

``Potential exists for a strong year-end rally, although it would not be the start of a new bull market,'' Goldman Sachs equity strategists led by David Kostin wrote in a note to clients today. The team also lowered their earnings per share estimates for companies in the S&P 500 for 2008 to $72 from $76 and for 2009 to $75 from $87.

The S&P 500 will ``trough in late November'' after four ``milestones'' have been met. These include the return of functioning short-term credit markets, the completion of the third-quarter earnings season and the U.S. presidential election. They also said funds may choose to close at year-end after the Nov. 15 deadline for providing advance notification on redemptions.

Futures on the S&P 500 expiring in December added 4.1 percent to 927.6 at 8:08 a.m. in New York, indicating the gauge will rebound from its 18 percent slide last week. That was the worst weekly drop since 1933 as investors shrugged off an unprecedented coordinated effort by central banks led by the Federal Reserve to lower borrowing costs.

The S&P 500 peaked on Oct. 9, 2007 at 1,565.15 and Goldman's previous year-end forecast was 1,400. It's down 43 percent since then. Separately, other Goldman Sachs strategists today lowered their forecasts for crude oil, natural gas, and base metals including copper and aluminum.

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To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net; Elizabeth Stanton in New York at estanton@bloomberg.net