U.S. stocks had a quiet summer but were shaken on Friday and Monday as Federal Reserve officials issued conflicting remarks on interest rate policy. Goldman Sachs stock strategists currently predict that the U.S. stock market will decline in the future, and the S&P 500 Index will close at 2,100 points by the end of this year.

Last Friday, the U.S. stock market suffered its worst decline since June. The S&P 500 index fell by 2.45%, the Dow Jones index fell by 2.13%, and the Nasdaq Composite Index fell by 2.5%. The market value of US$500 billion evaporated instantly.

However, boosted by the speech of Federal Reserve Governor Lael Brainard, U.S. stocks rebounded from the decline on Monday, with the Dow Jones Index rising 1.2%; the S&P 500 Index rising 1.4%, the largest gain since July 8; and the Nasdaq Index rising 1.5%.

According to Marketwatch, Goldman Sachs chief U.S. equity strategist David Kostin predicted in a note to clients sent on Sunday that the S&P 500 Index will close at 2,100 points by the end of this year. While this is down 1.7% from current levels, it would still mark a gain of 2.7% for the full year. By comparison, the yield on the 30-year U.S. Treasury note was 2.36% at press time.

Kestin listed five reasons in the report:

1. Goldman Sachs' "Extreme Sentiment Indicator" is currently at 95, which is an "extremely bullish" state. This important trading data signal means that the S&P 500 Index will fall by 2% in the coming month. After the Brexit referendum in June, the sentiment indicator once fell to 0, which was its strongest bearish state. Over the next few weeks, the market rose 4%. (According to the motto of investment pioneer Sir John Templeton, bull markets are always born in pessimism, grow in doubt, mature in optimism, and die in intoxication. Extreme bullishness may mean that a decline is coming.)
2. Rising political uncertainty will lead to a decline in the price-earnings ratio. The market predicts that Democratic presidential candidate Hillary Clinton has a 70% chance of winning the US election. But recent polls have shown the gap between Clinton and Trump narrowing, and stock market uncertainty typically rises before an election.
3. Recent U.S. economic data, including the Institute of Supply Management (ISM) manufacturing and non-manufacturing activity indexes, are not satisfactory.
4. With slow employment growth and weak domestic manufacturing, these data point to downside risks to earnings per share.
5. Stock valuations are still too high. The valuation of the S&P 500 Index is higher than 84% of the time in history, and the corresponding valuation of the median stock price is higher than 98% of the time in history. In other words, the Goldman Sachs analyst team believes that the fundamentals of the stock market are not enough to support the current stock price.

However, in the longer term, Kerstin pointed out that the 12-month target for the S&P 500 is 2,175 points and the end-2017 target is 2,200 points, which would be an increase of 1.8% and 3% respectively from the current level.

“Strategically, we expect the U.S. stock market to rise slightly in the next few years. Although the economic growth rates in 2016 and 2017 are expected to be only 1.5% and 2% respectively, the U.S. economy is still expanding. Sales and profits are still expected to grow at most companies, albeit at a limited pace. ”

Katie Stockton, chief technical strategist at BTIG, agreed with Goldman Sachs, saying the S&P 500 "will fall this week because it is not oversold in the short term." But she added that the decline was against the trend and her company would be looking for bargain hunting opportunities