As investors eagerly await the following inflation data release before the Federal Reserve’s meeting, Goldman Sachs analysts suggest that the market has already priced in a soft landing for the economy.

In a recent investor note, Goldman Sachs analyst David Kostin and his team highlighted the favorable combination of inflation data and indications of a growing labor market slack that led their economists to lower their estimated probability of a US recession within the next 12 months from 20% to 15%.

Kostin remarked, “Because the soft landing has mostly been reflected in equity prices, we expect little upside to the S&P 500 through year-end,” adding that their year-end S&P 500 price target is 4500, just under 1% higher than current levels.

Despite their cautious outlook, the analysts predict “resilient” earnings per share growth could propel the benchmark index by 6%, reaching their 12-month target of 4700.

The note also offered investment advice for the fourth quarter, suggesting that investors favor stocks returning cash to shareholders over those allocating resources to capital expenditures and research and development projects.

Additionally, the analysts recommended avoiding companies susceptible to higher interest rates.

While acknowledging the potential for a “choppy path for equities” in the coming months due to factors such as GDP slowdown linked to student loan repayments, elevated mortgage rates, and the possibility of inflation fluctuations, the analysts maintain confidence in the index’s growth potential.

Historically, September has been an unfavorable month for stocks, ranking as one of the least favorable behind August, last month witnessed all three major stock indices ending in the red, interrupting the S&P and Nasdaq’s five-month winning streaks.

Despite the August setback, the S&P 500 has experienced a 16% year-to-date increase, while the Nasdaq has surged by 32%, driven mainly by the unexpected tech-fueled rally of 2023.

Investor attention is now on releasing the August Consumer Price Index (CPI) inflation data, a critical factor for evaluating the Federal Reserve’s stance on interest rate hikes at its upcoming September meeting.

Treasury Secretary Janet Yellen expressed optimism over the US’s economic prospects, emphasizing her confidence in avoiding a recession while addressing consumer price increases.