In an interview with CNBC, Peter Oppenheimer, chief global equity strategist at Goldman Sachs (GS), sounded bearish on the market outlook. He said, “It’s worth noting that we expect pretty weak profit growth across all major regions this year.” Oppenheimer also said, “That’s where we get this idea of a sort of skinny and flat market, relatively low returns in a reasonably narrow trading range,”
Oppenheimer said that equity markets might have frontloaded their 2019 gains. Previously, another Goldman Sachs analyst sent out a bearish note. In a note to clients, Sharon Bell said, “The rally we expected has happened swiftly, and given this we see relatively modest returns on equities from here.”
The risks that spooked investors in the fourth quarter appear to have subsided somewhat in January. Since the markets got a little too bearish in December, they repriced themselves in January. Corporate earnings growth, which was among the biggest risk for markets (QQQ), has also looked strong.
Regarding the US-China trade war, the markets probably went a little overboard in January. The two countries have the tough task of reaching a trade agreement by the deadline on March 2. The Chinese economy has been strained. Companies including Apple (AAPL) and NVIDIA (NVDA) have said that China’s slowdown is hurting their earnings.
Chinese stocks have looked strong in 2019. Alibaba (BABA), Baidu (BIDU), and JD.com (JD) have risen 22.1%, 7.1%, and 14.6%, respectively, based on their closing prices on February 8. General Electric (GE) and Advanced Micro Devices (AMD) have risen 29.6% and 24.9%, respectively, while Qualcomm (QCOM) has fallen 11.6%.
Trade issues could haunt the markets over the next few weeks.