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GOLDMAN’S 8 YEAR DIVIDEND DISCOUNT MODEL

Goldman Sachs recently released their outlook for the S&P 500 future fair value using a dividend discount model.  Their base case estimates include a 6.7% EPS growth rate and a risk free rate of 4.5% – both of which I believe could be a bit generous as I believe profit margins are unlikely to surge back to their 2006 high and interest rates are likely to be much higher than an average of 4.5% over the coming 8 years.  Nonetheless, Goldman is as optimistic as ever.  They see the S&P 500 approaching 1860 by 2018.

ddm

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