Goldman Sachs on the S&P 500 Index
Recently, Goldman Sachs (GS) shared its earnings forecast for 2Q17. It doesn’t think that earnings growth will be very spectacular in 2Q17. David Kostin, an equity strategist at Goldman Sachs, said that expected weaker earnings growth in 2Q17 is already factored into the S&P 500 Index (SPY) (QQQ). As a result, we might not see any new highs in the S&P 500 Index.
Kostin said that Goldman Sachs thinks that the US economy (IWM) will grow at a moderate pace. We might not experience very fast or very slow economic growth. He thinks that the US will experience 2% real economic growth, 2% inflation, and 4% nominal economic growth.
Kostin on reforms and forward EPS
Kostin said that the proposed tax reform and infrastructure investments drove market movement in early 2017. However, he thinks that these reforms might take place in 2018. So, 2018 could be an important year for investors. Since new events might not trigger the market in the rest 2017, the S&P 500 Index might not touch new highs in 2H17.
According to Goldman Sachs, the S&P 500 Index could stay below 2,400 by the end of 2017. It will be marginally down from the 2,400 level. The S&P 500 Index’s forward EPS (earnings per share) showed 6.5% growth for 2Q17. If the actual EPS is better than the estimated figure, we could say that the S&P 500 Index’s earnings growth is improving. However, Goldman Sachs isn’t too optimistic about a higher index level at the end of 2017.
To learn more, read Why Marc Faber Thinks It’s Time to Diversify Your Portfolio.