Tags: Fortune | Goldman Sachs | Incredibly Depressing | Economic Predictions

Fortune: Goldman Sachs Has 'Incredibly Depressing' Predictions

Fortune: Goldman Sachs Has 'Incredibly Depressing' Predictions

By    |   Friday, 27 November 2015 12:06 PM

Goldman Sachs analysts has seen the future, at least into next year, and it's not pretty.

In fact, the predictions are so dismal, Fortune described them as "incredibly depressing."

Goldman analysts forecast next year to end right about where it began, with the S&P 500 stuck at 2,100 “amid a morass of higher interest rates, the end of margin expansion and a 'bifurcated' market through which participants will have to tread carefully,” CNBC explained. 

The stock market index is already at 2,090. "Include dividends and Goldman predicts that stocks will return just 3% in 2016. Stocks are up a measly 1.5% in 2015," Fortune reported.

"We forecast the S&P 500 index will tread water for a second consecutive year in 2016," Goldman said in a report for clients this week. "In many ways our 2016 forecast is 'deja vu all over again,'" CNBC quoted the report as saying.

“The weak market will come amid little growth in fundamentals, with gross domestic product projected to increase just 2.2 percent in both 2016 and 2017 and a 10 percent rise in corporate profits but a plateau in margins at 9.1 percent,” CNBC reported.

Goldman also warned of four uncertainties that are risky for the market and investors:

  • an interest rate path different from Goldman's baseline assumption of year-end 2016 fed funds at 1.4 percent and 10-year bond yields of 3.0 percent;
  • global economic growth below Goldman's 3.5 percent forecast;
  • the U.S. presidential election;
  • various geopolitical factors

"Goldman says if you do want to bet on individuals stocks, it’s better to place your bets on companies that get most of their sales in the U.S. Those companies will not be hit as hard by a strong dollar," Fortune reports.

Among the stocks Goldman recommends for 2016 are Amazon (AMZN), Chipotle Mexican Grill (CMG), Whole Foods (WFM), and Wells Fargo (WFC).

"Bear in mind, Goldman is predicting a rather rare scenario. Investors don’t tend to stay down in the dumps for long. The last time stocks had two disappointing years in a row was in 2001 and 2002," Fortune reported.

"And there have only been five times since 1928 in which the stock market increased by less than 5% a year for two years in a row. Most of those cases happened around a recession, which is not what Goldman is predicting for next year."

Meanwhile, Bank of America Merrill Lynch’s Savita Subramanian, head of U.S. equity strategy and U.S. quantitative strategy, has forecast that the Standard & Poor's 500-stock index will reach 2,200 in 2016, Bloomberg reported.

She also included a target of 3,500 by the year 2025. As of now, the index is hovering a little below 2,100.

For next year, Subramanian says to "stick with the S&P 500," despite valuations having less room to run and a long-in-the-tooth bull market in equities heading into its seventh year.

"We expect modest gains for U.S. large cap stocks in 2016: the likelihood of a recession in the next 12 months is low in our view," the analyst added. Neither valuations nor the economic data look particularly worrisome when compared with previous peaks in the market, according to BofAML.

(Newsmax wire services contributed to this report).

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Goldman Sachs analysts warn that the S&P 500 will stall next year at current levels, urging investors to be cautious amid rising interest rates.
Fortune, Goldman Sachs, Incredibly Depressing, Economic Predictions
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2015-06-27
Friday, 27 November 2015 12:06 PM
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