The S&P 500 has staged a huge roughly 25% rally since the start of the year.

How much more upside should investors expect and what could drive those gains?

The idea that the economy is growing suggests that if fair value is around the current level,

then the forward trajectory of the index is going to be driven by earnings as opposed to a valuation expansion.

I'm Allison Nathan and David Kosten and Ryan Hammond from our U.S. portfolio strategy team in Goldman.

They recently boosted their year- and 12 month targets for the

S&P 500. Let's find out why. David Ryan, thanks for joining us. Thank you, Allison.

Thank you. So David, we've spoke to you earlier this year. The SMP has been on nothing but a tear,

minus a bit of a blip in August.

But if we think about where we are today

at new record highs again, what have been

the primary drivers of this rally, especially in recent months?

I think you can think about the rally, Allison, 2A.

The first is it's been equally driven by earnings growth and valuation expansion.

And that is different from calendar 2023

when it was almost about the 75% of that return

came from a increase in valuation. So the first part of it is earnings in valuation. The second

is the largest stocks in the market that get all of the visibility often known by the term

Magnificent Seven. Those stocks are up 36% this year. The typical stock is up

around 17%. So in aggregate, as you pointed out, the index level is up around 25% as we speak today and that's driven in part by this biggest

stocks that help lift the overall index.

And if we think about earnings, are they doing better than we expected coming into the year? Is this just a reflection of the

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