Displaying items by tag: large caps
The market has been doing very well since October 30th, up around 9%. Goldman thinks even bigger gains are coming for the S&P 500. The bank has been encouraged by investors’ response after the election and thinks that the vaccine is really in the driver’s seat. The bank’s research team has significantly upgraded their earnings forecasts for next year and 2022 based on the better-than-expected recovery. According to Barron’s, a few assumptions underpin Goldman’s outlook, “at least one vaccine becoming widely available in the U.S., less drastic changes in policy because Congress is most likely to be divided, and the continued V-shaped economic recovery”. Goldman’s official forecast for the S&P 500 at the end of 2022 is 4,300 and a 20% gain from now through the end of 2021.
FINSUM: The “continued v-shaped recovery” is the most volatile aspect of these assumptions, but they also discounted a potentially positive one—another stimulus package. The forecast seems reasonable.
Large cap value is a very interesting area at the moment. Over the last few weeks there has been a pickup in breadth, with gainers outpacing losers 2-to-1. Megacap tech stocks are not leading the market like they were early on in the recovery. That means the chances for broad market gains are looking stronger. With that in mind, large cap value looks like an excellent choice. Compared to small and midcaps, large caps are less volatile and more diversified. They do have more international exposure (which could be a positive or a negative), but on the whole they appear as though they have as much or more upside potential with less downside risk.
FINSUM: If you believe in a coming broad-based rally in stocks, then large cap value seems like a good place to be.
Analysts from across the Street have now put their predictions in for 2020, and the outlook is not as rosy as one would expect from a bunch of analysts who get paid to be bullish. The consensus outlook for equities can best be described as “meeehhh”. Morgan Stanley, UBS, and Stifel are forecasting that the S&P 500 will fall next year, while Citi, BAML, and Goldman are forecasting rises, but modest ones (single digits at the high end). Taken as an average, analysts think stocks will rise just 3% next year.
FINSUM: A published 3% forecasted rise by Wall Street research analysts feels more like they are expecting a 10% loss.
Walmart did something a lot of conservatives may not like this week—they announced that they would stop selling ammunition for assault weapons. Despite the political turbulence it may cause for the company, it could have a bullish effect on the stock in the long run. The reason why might not be obvious at first glance, but immediately becomes so once you hear it—the ban on assault weapons ammunition will give the company a higher ESG score, which means it may be included in more funds by default, and thus see increased buying.
FINSUM: Whatever your politics on this move, from an investment perspective this could be bullish.
Name the two main factors which drove this decade-long bull market. Ours would be the Fed’s easy policy, and huge levels of corporate buybacks. Well, that second one, which has inarguably been at least a core pillar of the bull run, is ending. Companies are pulling away from share buybacks, lessening one of the big price drivers for the market. Buybacks have slipped alongside the market’s trouble, as companies are no longer stepping in to buy shares, sending buybacks to their lowest level in 18 months.
FINSUM: Do you remember the earnings recession that occurred for a few years during this bull market? Buybacks are what kept prices afloat.