Goldman Sachs Cuts S&P Target From 1,500 To 1,450

Tyler Durden's picture

A month ago, when Goldman, just as we predicted, cut its GDP outlook for Q1 (to be followed by downgrades to both H2 and Q2) we said: "Some other things nobody will be able to predict: Hatzius dropping full
year GDP from 4% to 2.25%; Goldman's downgrade of precious metals,
Kostin's 2011 S&P 500 price target reduction by 20%, and Goldman
getting its New York Fed branch to commence monetizing $1.5 trillion in
debt some time in October." One by one all of the predictions are starting to come true: this morning Goldman head market strategist just cut his S&P 500 outlook from 1,500 to 1,450 (granted it is not 20%...yet. There is, however, over 7 more months left in the year). In the meantime, look for the thunderous Wall Street lemmings herd to do the same. Just as we have been predicting on both. Time for CNBC to trot out Laszlo Ultrasound and to advise him to angle the predictive instrument known as a ruler a littler lower: the S&P 2,854 call in 2 years suddenly appears in jeopardy (absent QE7 of course).

From Goldman:

We have lowered our S&P 500 2012 EPS forecast to $104 from $106 and our year-end 2011 price target to 1450 from 1500. At the sector level, the largest changes in our earnings estimates are a $2 increase in Energy 2012 EPS, a $1 decrease  in Information Technology, a $2 decrease in Financials earnings and a smaller negative revision to Consumer Discretionary. We made further minor changes to other sectors that are not large enough to highlight.

And another shocker: Goldman just cut its outlook on S&P margins. A move so obvious we predited it back in November 2010.

We expect S&P margins to contract in 2012, focus on sales growth. The combination of higher commodity prices, lower global GDP growth and rising inflation raises our sales forecasts but lowers S&P 500 expected margins in aggregate. We focus on sectors and stocks best positioned to grow earnings through higher sales. We expect Energy, Consumer Staples and Info Tech to post the highest revenue growth in 2012.

In short:

Our new 3-, 6-, and 12-month price targets: 1400, 1450 and 1500

We forecast S&P 500 will grow sales by 10% in 2011 and 8% in 2012, similar to consensus. But we expect margins will peak at 8.9% this year and slip to 8.8% in 2012. Consensus forecasts margins rise to 9.6% in 2012.

Our commodities strategists forecast 20%+ gains in oil, copper, zinc

We expect a slow but sustained GDP growth environment that will tighten key supply constrained markets and drive prices higher in 2012. Persistent impact of MENA events will push Brent crude to $140/barrel by end-2012.

Stocks with fast sales growth should perform even if margins fade

Firms forecast to generate high sales growth in 2012 are better positioned to absorb rising commodity prices and still post strong EPS gains than companies with average or lackluster sales prospects.

Look for all of the other predictions noted in the first paragraph to come true.

GS Equity 5.26

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hugovanderbubble's picture

And what about munibonds? Goldman?

tarsubil's picture

So 1400 will be the top? Just look at the chart on page 4. Who would, given complete financial freedom, want to invest in that?

Bob's picture

"Absence of QE7" is right.  Could this be part of the charade where QE3 becomes a widely promoted "necessity"?  Me thinks so. We gotta keep sweating that S&P.  We just gotta.

Must. Not. Let. It. Drop. 

Otherwise, what do we have to tell the proles?

LRC Fan's picture

Upgrades-Uber bullish

Downgrades are simply "regular bullish"

Look for a market pop at some point today.  Count on it. 

snowball777's picture

We're sorry...our previous S&P target was specified in octal notation.


Dolemite's picture

Sell EuroUSD and stocks
Buy long end of US treasuries

knukles's picture


Such a noble change in forecast.
One day's finaglings.

boiltherich's picture

But but....did they not just increase estimates for long oil?  Like on Tuesday?  Did they think we would just not notice falling real GDP?  Or that we could put two and two together and figure out where the market manipulation is coming from?  I am issuing my own forecast, look for pitchfork and torch futures to rise exponentially. 

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