Displaying items by tag: stocks

(New York)

Yes, you read that right, Bank of America is forecasting a 35%+ GDP fall for the YEAR, not just Q2. The bank thinks the Coronavirus downturn is so bad that the US economy will shrink 7% in Q1, 30% in Q2, and 1% in Q3, a cumulative 35.55% for the year. The downturn would be the worst to ever strike the US.


FINSUM: This is by far the bleakest projection we have seen. Goldman, for instance, sees 19% growth in Q3. So if the economy shrinks 35% this year, what is fair market value for the S&P 500?

Published in Eq: Total Market
Wednesday, 01 April 2020 10:42

Citi Says the Economy is About to Turn Around

(New York)

Citibank is pitching a convincing and optimistic view of the economy, and it is a refreshing take in an otherwise bleak landscape. The bank says the big influx of tests that will become available may allow the economy to open much sooner than planned. Their argument is that the growth in tests will allow 60% of working-age US individuals to be tested by the end of April, and 95% by the end of May. As workers are tested, they can head back to work, quickly re-opening the economy. Accordingly, by the end of this month 90 million Americans may be back at work. “While potential therapeutic strategies for COVID-19 seize headlines, we believe diagnostics rather than therapeutics are far better positioned to materially change the economic and even medical outlook for the current COVID-19 pandemic”, says Citi.


FINSUM: Honestly, this sounds like more of a plan than a forecast, but it is a very good one, and does lend some useful optimism.

Published in Eq: Total Market
Wednesday, 01 April 2020 10:40

Goldman Sachs says GDP to Drop 34% in Q2

(New York)

Goldman Sachs issued a bleak revision of its earlier estimate for the looming second quarter recession. When the pandemic first struck, Goldman called for a 9% decline. It then proceeded to increase that forecast to 20% as the lockdowns began. Now it has reissued guidance, calling for a 34% decline in GDP and a rise in the unemployment rate to 15%.


FINSUM: This is a profound forecast and speaks to the scale of the pending downturn. The good thing, though, is that Goldman thinks there will be a 19% recovery in Q3.

Published in Eq: Total Market
Tuesday, 31 March 2020 10:05

Goldman Says the Market Has Not Bottomed

(New York)

In what comes as a very important announcement right now, Goldman Sachs argues that the stock market has not bottomed, and that it will take three things happening for the nadir to arrive. In order for markets to reach a bottom and start to sustainably rise, Goldman says case numbers must start to fall, there must be evidence that Fed and Congressional efforts are sufficient to support the economy, and investor sentiment and market positioning must bottom out (which has not even close to happened yet, according to GS). Goldman expects the S&P 500 to finish the year at 3,000.


FINSUM: We agree with the first two points (about case numbers and stimulus), but the third argument about positioning seems circular to us, as it relies on the markets getting worse before getting better.

Published in Eq: Total Market
Tuesday, 31 March 2020 10:04

This is How Much Dividends Will Fall

(New York)

Income investors have been frightened by the extent to which the current Coronavirus downturn is going to cause an economic downturn and thus a big cut to dividends. The only good news on this front recently has been that companies are suspending buybacks before dividends. In assessing the damage, Goldman Sachs says overall dividend payouts are going to be slashed by 25% this year. That figure includes a 38% fall for the next nine months added to the 9% rise in dividends in the first quarter.


FINSUM: This is big, but it would be far from catastrophic levels.

Published in Eq: Dividends
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