Goldman Sachs raised its 2024 S&P 500 target by 8% to 5,100, forecasting a tailwind for U.S. stocks from falling inflation and declining interest rates.

Unlike 2023, when the so-called Magnificent Seven group of mega-cap growth and technology stocks have powered the majority of the year’s advance in the S&P 500, the upcoming gains in the stock market will come from cyclical sectors and companies with smaller market capitalization, Goldman said in a note late on Friday.

“Looking forward, the new regime of both improving growth and falling rates should support stocks with weaker balance sheets, particularly those that are sensitive to economic growth,” the firm wrote.

Federal Reserve chair Jerome Powell said last week that the U.S. central bank’s historic tightening of monetary policy is likely over as inflation falls faster than expected, and that a discussion of cuts in benchmark rates is coming “into view.” The dovish shift from the Fed helped push the S&P 500 near a record high and sent bond yields tumbling.

Goldman strategists expect the Fed to cut rates by 25 basis points at its March, April and May meetings, followed by quarterly cuts that will bring benchmark rates down to a range between 4% and 4.25% by year-end from the current range of 5.25% to 5.5%.

Benchmark 10-year Treasuries will likely end 2024 yielding around 4%, close to their current level, the bank said. Falling rates will push the S&P 500 2024 forward price to earnings multiple to 19.9 from its current 19.2, the firm said.

The bullish outlook from Goldman Sachs comes as other firms have increased their expectations for interest rate cuts by the Fed. BofA Global Research now sees the Fed cutting rates by 100 basis points next year, beginning with a 25 basis point cut in March, compared with its previous estimate of 75 basis points.

The S&P 500 rose 0.3% Monday and is up slightly more than 23% year to date.