The much talked about scenario of Goldilocks or Goldilocks It is a situation that some investment banks in the US are beginning to consider, taking the current scenario as a reference. Goldman Sachs It is the most representative entity that has jumped on this ship and, in fact, has improved its expectations of the stock market. He believes that the worst is over for US equities. In the latest report from david costin, head of the bank’s US stock market, explains his economic and earnings forecasts that suggest a recovery is more likely. “Our economists attribute a 25% probability of recession in the next 12 monthsvs. 65% median forecasts (…) In this ‘soft landing’ baseline scenario, we expect S&P 500 earnings per share to grow 1% to $224 in 2023, well above consensus forecast fundamental of $206 and slightly above consensus in the $221 range high”After the first quarter earnings season, the banking firm’s research team continues to believe that the worst of the cycle of negative reviews is behind us, and the trajectory of its analysts’ earnings estimates has improved in recent weeks. By 2024, believes that the consensus forecast of $246 (+11%) “However, bottom-up estimates often start out too optimistic and cut off during the forecast period; our 2024 EPS estimate of $237 (+5% growth) implies a possible negative review of 4% with respect to consensus, which would be consistent with the typical pattern and is unlikely to be a catalyst for lower prices”, they state. This causes, as a whole, Goldman Sachs has decided to raise its target price for the S&P 500 to end of the year. “We raised the target to 4,500 points by the end of 2023 (compared to the previous forecast of 4,000), so there would remain an upward path of 5% and it would coincide with the trajectory of our estimate of growth in earnings per share”, explains Kostin throughout the text. “This return will continue to face stiff competition from bonds (yielding 5%) and IG credit (yielding 5%), each of which carry less risk,” he says. Goldman Sachs expectations, but the combination of slowing inflation, healthy growth and high market concentration suggests, in his view, that current multiples may persist. “If the economic growth data remains strong and inflation continues easing in line with our economists’ forecasts, a lower equity risk premium is likely to offset slightly higher real interest rates and support current equity multiples,” Kostin continues. , the main downside risks to its outlook for the S&P 500 will have to do with a “unexpected slowdown in growth and persistent inflation That Triggers a Fed Turn Toward a Hard Squad.”In a Mild Recession, We Estimate S&P 500 Earnings Per Share Would Fall Between 200-200d. Roughly In Line With Historical Average Decline Of 13% IN Recessions… This would likely lead to a more moderate decline in the consensus estimates.which tend to fall well after the share prices”, he argues. From Goldman Sachs they also focus on the main support of the market that has existed up to now: 8 stocks that have managed to beat the index. It is what is known as the narrow breadth of the market. Something that does not have to be negative, however, from his point of view, in the long term. breadth of the market has narrowed Recently at the highest since the tech bubble, but another 9 episodes of sharp narrowing since 1980, the S&P 500 traded normally sideways over the next few months as intra-market gyrations continued. “In addition to below-average returns, the falls have also been higher than average in these episodes”, Any. Over time, however, a “rally” has been more typical, with S&P 500 valuations and prices rising along with a reversal of momentum within the market.
Goldman Sachs sees recovery: ‘Goldilocks’ path and S&P 500 rise
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