The stock market rally for 2024 has reached its peak, according to Goldman Sachs ( GS ). The firm’s chief U.S. equity strategist, David Kostin, has predicted a flat return for the S&P 500 for the remainder of the year.

What Happened: Kostin mentioned in an interview with Bloomberg TV that there is no economic, valuation, or earnings rationale for additional upside. The S&P 500 has already surpassed Goldman’s year-end target of 5,200.

This suggests “a flat return from now till the end of the year,” Kostin said, leaving open the possibility for a change in forecast if variables change.

Goldman’s team currently projects real GDP growth of just under 3% and earnings growth of about 8%. However, valuations are currently high and unlikely to boost stocks further.

“They’re at an index level basis almost 21 times earnings. So the probability of a multiple expansion, while possible, is less probable,” Kostin said. “The idea of earnings being much greater than we’re assuming we think is pretty low.”

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Despite this, Kostin hasn’t entirely dismissed the possibility of a bullish turnaround. He noted that if the Federal Reserve has to cut interest rates more dramatically than assumed, this could lead to more upside. However, Goldman’s base case still considers two cuts as the most likely scenario for this year.

Why It Matters: Recently, the stock market showed a bullish signal, with the S&P 500 and the NYSE advance-decline lines hitting new all-time highs. This was seen as a leading indicator by technical analysts. However, Kostin’s recent comments suggest that this bullish trend may not continue.

Meanwhile, Mohamed El-Erian, the Chief Economic Advisor at Allianz, has suggested that the latest inflation data could prompt the U.S. Federal Reserve to consider an earlier interest rate cut, potentially boosting bond and equity prices. This could be a factor in the stock market’s future performance.

Additionally, investment strategist Ed Yardeni has warned that the Fed’s potential monetary easing through interest rate cuts could lead to a stock market melt-up, potentially propelling the S&P 500 to record highs by the year’s end.

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