In a note to clients, Goldman Sachs' influential chief strategist Abby Joseph Cohen said recent economic data confirm the view that U.S. economic growth is slowing, which will prolong the current expansion.
"We believe that profit growth will continue at a more moderate, but acceptable, pace. The U.S. equity markets are expected to generate good, but not abnormally strong, returns in the coming months and to do so with more normal volatility," Cohen said.
She sees profit gains of 8 to 10 percent in coming quarters and the composition of profits may also shift favorably toward higher margin markets. Goldman forecasts S&P 500 operating earnings-per-share of $56.00 in 2000, though Cohen said this may prove to be too cautious.
Since April, the Goldman strategist said the individual share price performance has been mainly driven by fundamental factors, such as earnings momentum and relative valuation -- rather than prior share price momentum.
On Wednesday, Cohen rolled forward her 12-month price target for the S&P 500 to 1,650 for summer 2001. The price target for year-end 2000 remained unchanged at 1,575.