Displaying items by tag: Goldman Sachs
The market has been highly topsy turvy lately. With no real direction, stocks have been swinging back and forth based on economic and COVID news from day to day. With this kind of market looking likely for the near term, Goldman laid out some of its best picks for this kind of environment. Speaking about the market generally, the bank said “Consensus expects 9% upside to the typical stock over the next 12 months and volatility should remain elevated through the rest of the year, suggesting low risk-adjusted returns in the coming months.” Its stock picks included: Merck, Verizon, Philip Morris, General Motors, Comcast, Mondelez, and Coca-Cola.
FINSUM: A lot of old blue chips here whose earnings aren’t likely to be hurt too much by COVID.
Godman Sachs has generally been underperforming its competitors for years. However, under the leadership of CEO David Solomon the future is looking increasingly bright. On the one hand, the bank’s bet that trading would return as a huge driver of revenue and profit is starting to look smart (though it took about a decade), but on the other, its new focus on consumer and commercial banking products seems wise. Marcus, the brand under which its consumer-facing high yield savings accounts for consumers and businesses is marketed, has been growing its user base, with Goldman Sachs more generally has entered into many partnership deals in the consumer space. These include a new card with Apple, and a small business lending program in partnership with Amazon.
FINSUM: Goldman has been trying to shed its clubby image, and so far it seems to be making all the right moves. We are bullish on the future.
Goldman Sachs put out a pretty serious statement today. The bank said the surprising and “unloved” rally since stocks bottomed in March will not continue. The bank thinks that the market has set very high expectations for the recovery, and that waters are currently troubled with China. Furthermore, the huge gains have largely been driven by 5 stocks, and their needs to be much broader-based price increases for the market to rise. This will be tricky because the other 495 stocks in the index are more economically-sensitive. “Broader participation in the rally will be needed for the aggregate S&P 500 index to climb meaningfully higher. The modest upside for the largest stocks means the remaining 495 constituents will need to rally to lift the aggregate index”, said the bank.
FINSUM: This makes complete and total sense and helps explain why the rally has slowed in recent weeks.
The last couple of trading days have thrown cold water on that bullish trend that sent the market soaring all April. Weak earnings and huge job losses took their toll, and the reality of a slow-slog recovery are weighing on markets. With that in mind, a former Goldman Sachs fund manager, Will Meade, says that stocks are going to fall another 40% from here. Meade argues that this year will be just like the 2000 dotcom bubble: “The Nasdaq in 2000 did a similar bear market bounce as stocks this year — dropped 40%, then bounced 42% off the bottom retracing 61.8% of its drop. It stalled then fell 43%, making a new low four months later,”. Similar to 2000 is that fact that there is additional uncertainty this year created by the election.
FINSUM: This is far from implausible. As the reality of how hard this recovery might be sets in, markets may completely abandon their exuberance.
Goldman Sachs is making their position clear. The bank thinks that after all the volatility we have seen, the worst is behind us and stocks have already hit bottom. Goldman says that because of the Fed’s “do whatever it takes” attitude, it is unlikely the market will fall further. “The Fed and Congress have precluded the prospect of a complete economic collapse … These policy actions mean our previous near-term downside of 2,000 is no longer likely” for the S&P 500 Index, according to the bank’s strategists.
FINSUM: We are of two minds on this. On the one hand, Goldman makes a good point about the Fed propping up markets. On the other, there is a liquidity-induced real estate crisis brewing and the true ramifications of this downturn (including its expression in S&P 500 earnings) will not be felt for a few months.