Goldman Sachs GS cuts its valuation forecast for the S&P 500 as rising interest rates signal bad times for stock prices.

Investors are responding by avoiding most asset classes and investing in cash to weather the storm.

“A hard landing scenario is inevitable”: Goldman Sachs Chief US Equity Strategist David J Kostin announced a target score for the index of 3600 by the end of the year, maintained that score in six months and reached 4000 within a year.

The index nearing its 2022 lows this week, with fears of a recession becoming more substantiated. The Dow Jones also marked its lowest level of the year on Friday, with other major indices also posting losses.

Goldman Sachs revised its forecasts for market measure as interest rates are expected to continue to rise. Goldman had already lowered its year-end price target for the S&P 500 from 4700 to 4300 in May when the federal funds rate was expected to peak at 3.25%.

But after the Fed raised the interest rate trading in a 3% to 3.25% range this week – with all signs pointing to more gains in November and next year – the company revised its market forecasts to range to a high of 4.5% to 4.75 % to prepare.

This has prompted economists at Goldman Sachs to lower the price target for the S&P 500 and switch its investment recommendations to a “defensive” strategy. The company advises investors to own stocks with quality characteristics such as “strong balance sheets, high returns on investments, and stable top-line growth.”

“A majority of equity investors believe that a hard landing scenario is inevitable and their focus is on the timing, magnitude and duration of a potential recession and investment strategies for that prospect,” the Kostin report said.

With a historically low unemployment rate, consumer incomes and spending are likely to rise in 2023, leading to strong growth that would drive inflation further higher, which could lead to more Fed…