(New York)

Corporate earnings are doing well and are forecasted to keep rising. Alongside those improvements in operating performance, one would expect stocks would likely keep rising. Not so fast, says Goldman Sachs, who says that earnings improvements will likely do little for stock prices. David Kostin, the firm’s chief US equity strategist, says that earnings’ influence on prices will be moderated by a number of factors. “The appreciation potential will be constrained by tightening monetary policy, a flattening yield curve, rising trade tensions, and the upcoming mid-term Congressional elections.”

FINSUM: In other words, stock market investors are dealing with much more than operating performance. We think the market will discount earnings even more than expected because a lot of the gains are being driven by the tax policy change, making the improvement temporary in nature.