Displaying items by tag: Goldman Sachs

David Kostin, a strategist at Goldman Sachs Group Inc., took a bearish tilt on U.S. stocks worrying about risks that may be on the road ahead. Goldman is far from the only bear on Wallstreet, Michael Wilson of Morgan Stanley says that the fair value of the S&P 500 is closer to 4,000. This would be a 10% downturn in the S&P if fully realized. Goldman isn’t that pessimistic but if real U.S. treasury yields rise 60 basis points then that will be their baseline. The median forecast is still quite positive for the S&P 500 by the end of the year with a target price close to around 5,100. However, Wallstreet says the antidote is to focus on quality and energy stocks.

FINSUM: Wall street is forgetting how bad sustained realized inflation will be for the market; it's without a doubt the biggest risk, because companies are used to operating with systematic sub 2% inflation.

Goldman Sachs updated its path for Fed tightening in 2022 calling for four rate hikes instead of three in 2022. This is a fairly aggressive path for tightening as the current Fed target interest rate is between 0%-.25% which means it will hit around 1-1.25 by Goldman’s forecast. The biggest reason for the rate rises is the tightening labor market. Previously the Fed leaned on slack in the labor market as an excuse to brush off inflation concerns but now they are no longer doing that. Goldman has the hikes penciled in for each quarter March, June, September, and now December. Goldman saw regional San Francisco President Mary Daly’s comments of shedding some balance sheet weight of indicating the Fed’s future path.

Finsum: The Fed hasn’t tightened this quickly in the post-financial crisis era, but broadly the markets and yields are in lock step with Goldman’s predictions.

Bitcoin has stumbled as of late, all the way down to $46,000, but Goldman Sachs isn’t backing off their bullishness and they say the price may double to over $100,000 by the end of 2023. The first of the primary reasons is just the groundswell into digital assets generally. The second big factor is how investors will fundamentally see bitcoin moving forward, as a store of value substitute. They see bitcoin eating away at a stalling gold bouillon. To date, bitcoin only makes up a fifth of the ‘store of value’ market, but that could swing all the way up to a market majority. Other cryptos could also jump in to take some of the markets as well.

FINSUM: As Fed uncertainty lingers, investors are going to push themselves more into alternatives to hedge inflation and interest uncertainty and maintain a store of value.

Omicron is sweeping the U.S. and once again threatening to cripple the economy, already major airlines are canceling flights and potential Christmas plans. This makes moderate Dems walkout on the Build Back Better even more critical as the country could desperately be in need of stimulus at the moment. This caused Goldman to cut its GDP growth by 1% annualized in Q1 2022 and a half a percent in Q2. CPI rose at a 39-year record in November, which could make the possibility of a big BBB bill even less likely as price pressures deter policy makers. Goldman still sees the possibility that congress will aid a bit with the new omicron surging.

FINSUM: It’s tough to justify another trillion-dollar stimulus package with roaring inflation, and it might be futile with the Fed pumping the breaks; lookout for stagflation!

The environmental, social, and governance investment trend continues on a full head of steam as Goldman Sachs and BNY Mellon both launched a series of new ETFs aligning with different ESG objectives. Goldman launches a Large Cap equity ETF which tracks companies aligned with the new Paris Climate Agreement. Meanwhile BNY Mellon drops three new active ESG ETFs: the first will invest in over 80% sustainable U.S. equity, the second geared towards global markets, and the final will target emerging markets. These are just the latest as both Ark and JPMorgan created two new ESG ETFs as well in the last week. Some of the newer ETFs are following in the Euro area trend of specific disinvestment from companies reliant on C02.

FINSUM: The best part of all the new ESG focused products is the way they can be added that complement an existing portfolio: lacking large cap, pick up an ESG focused large cap ETF.