goldman sachs doesnt anticipate much more of a comeback for stocks but does see downside risks ahead the s  p 500 is up about 16 off its midjune low and had already hit goldmans yearend target of 4300 before retreating now however the summer rally appears to be fizzling with the index snapping its fourweek advance last friday and opening lower monday  goldman attributes the recent rally to the fact that investors embraced the view that the federal reserve will pivot from hiking rates seemingly at every meeting and the economy will achieve a soft landing in fact while the market isnt pricing in a final rate hike until february 2023 six months from now —recent sector and factor performance have closely resembled the historical pattern around the end of the hiking cycle david kostin goldmans head of us equity strategy said in a friday note to clients at the same time the s  p 500 rebound also closely resembles a bear market rally  he added performance around bear market rallies and the end of fed hiking cycles look similar and ultimately the path of both inflation and growth will determine the markets trajectory through yearend kostin wrote for one theres a risk that the equity market could decline even after fed rate hikes end in 2000 the feds pivot didnt boost stocks going into a recession by contrast if inflation surprises to the upside and requires the fed to tighten more aggressively than our economists expect we would expect equity valuations to compress as a result kostin said with the market trading handinhand with real rates this year lower real rates could boost stock valuations according to kostin positive earnings surprises could also provide some upside although he thinks those are unlikely lastly theres room for upside if institutional investors who are lightly positioned in stocks add risk in a rising market he said looming downside risks on the other hand renewed fears about the prospect of a recession would almost surely unwind the recent rally kostin wrote goldman economists estimate a one in three probability of a recession in the next 12 months if that happens the firm thinks the s  p could fall to 3150 in addition the feds focus on maintaining tight financial conditions requires that stocks dont rise by too much kostin said as equity valuations climb financial conditions loosen by definition he said goldmans financial conditions index fci has fallen by 69 basis points from its june peak meaning financing has become easier equity valuation expansion has been the largest contributor to the loosening fci during this period kostin wrote —cnbcs michael bloom contributed reporting