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Goldman's 2015 S&P 500 Trajectory In 1 Chart: Drop, Pop, & Slop
Not satisfied with merely "nailing the number", Goldman Sachs' David Kostin forecasts the S&P 500's trajectory through 2015. Recognizing, as we did, that Bullish Sentiment is as highs as it gets, Kostin expects short-term weakness during the next month (the drop), earnings growth thanks to lower oil prices into mid-year (the pop), but multiple compression after rate hikes into year-end (the slop)...
S&P 500 has surged 10% since October. Our US equity market Sentiment Indicator now shows an extreme reading of 100, suggesting on a tactical basis S&P 500 will decline during the next month.
Strategically, we expect 3% GDP growth will drive 5% earnings growth in 2015 and upside exists if crude prices remain low. Rising profits will lift the market to a new high around mid-year but after the Fed hikes in 3Q the P/E multiple will slip to 16x at year-end.
We forecast the S&P 500 will close the year at 2100 and deliver a total return of 4% vs. -1% for a constant maturity 10-year Treasury.
Extreme positioning is a strong contrarian signal for subsequent equity performance
Market: High valuation and rising rates mean limited S&P 500 gain
Median stock in S&P 500 currently trades at nearly 18x forward earnings, a multiple experienced only 2% of the time since 1976. Falling interest rates and a 58% P/E multiple expansion since 2011 will start to reverse in 2015.
Source: Goldman Sachs
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Amplitudes look a bit damped to me.
"...but multiple compression after rate hikes into year-end."
Rate hikes???
HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA!!!
HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA!!!
HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA!!!
You presume the FED'S job is to help the economy and put money in your pocket, there's where you're wrong. Their job is to make banks zillions of dollars by fleecing the sheep.
Will rate hikes help the economy? Of course not, and that's exactly why the FED will do them. Time to unwind and fleece the fat, stupid sheep who assume the FED is their friend.
Not
Going
To
Happen.
Rate hikes will crush the banks (since they borrow short and lend long). The duration mis-match would topple the entire financial system. The fed (and, in fact all central banks) have painted themselves into a 'coffin-corner.'
Want to see what's coming in terms of rates?
Look at a chart of JGB's since 1989:
http://royaltyinsider.com/wp-content/uploads/2014/11/10-Year-Japanese-Government-Bond-Yield_Royalty-Review_11132014.png
[We are ALL Japan now...]
Cash, Bonds, Gold...
We Japaned some folks???
Really? I'll bet they look cool:
http://en.wikipedia.org/wiki/Japanning
Silly rabbit, the banks unloaded all their risk onto the public. They've played this game a dozen times in the last 100 years and still nobody sees it coming. You're the reason they can play it over and over again.
"They can't do that, they'd go broke!"
Yeah, name one time the big banks paid for their crimes. People never learn.
Do these guys ever forecast down years for the indices?
Only after the crash, once the damage is done they try to maximize it so they can buy ultra cheap getting positioned for the recovery.
They are Century 21 salesmen with multi-colored blazers. No, prices going down is impossible,,,never can happen...never...ever.
What about the low-end of the megaphone pattern ? Sheesh they must not read ZH.
Which megaphone pattern?
The one that started mid-2014 with a range of about 2,600 and targets the DOW at 13,000
OR
The one that started in the late 1990's with a range of about 12,700 and targets the DOW at -7150?
Oh, crap
P.S. Anyone notice today that none of the clowns on CNBC mentioned the "January Effect"?
Panic now! Panic now!!!!!!!
Will take a little longer than shown on the chart to get to 675 S&P.
You mean -675 don't you?
Bring back the swirlogram
Get to work Mr. Bullard!
All b ok wendsday when they release fed minutes a setup. I wish I had the balls to get in but ill stay out and loose
Drop, Pop, & Slop sounds like a good title for a porn series
POS forecast - with little to no analytical linkages provided to justify and upward sloping SnP price return. "ummmm, I think its gonna do a little of this followed by a little of that and that we'll still get 4% - something like that (draws arrows)." Holy fuck - I feel better!
According to this chart QE4 will be in September. Just in time for the election show!