This page has been archived and commenting is disabled.
Goldman's 4 Reasons Why The S&P Will Remain Unchanged For The Rest Of 2015
Anyone expecting a surge in market volatility as Mario Draghi recently warned, will be disappointed to read Goldman's latest forecast which not only does not budge on its year end S&P forecast of 2100, but predicts that the market will be flat as a pancake for the balance of the year.
Here is Goldman's assessment of why one may as well take the rest of the year off:
The most likely path of the US stock market during the next six months is sideways. We forecast the S&P 500 index will end 2015 at 2100, roughly unchanged from the current level. S&P 500 delivered a compound annual price return of 18% during the past three years and 13% during the past five years, both well above the long-term average annual return of 5%. Mean reversion is a powerful force. Put simply, “flat is the new up” when it comes to the future path of the US stock market.
And here are Goldman's four reasons why the bank expects the S&P 500 will end 2015 unchanged from the current level: High starting valuation, negligible earnings growth, outflow from domestic equity mutual funds and ETFs, and modest economic growth. Offsetting these headwinds to a higher market, buybacks remain robust and serve as a pillar of support in the current environment.
Finally, Goldman adds that its "sentiment indicator stands at 0, implying a tactical rally is likely during the next month." So... expect a plunge?
Here are the four reasons with more detail:
1. At 2100, S&P 500 currently trades around fair value based on a range of financial metrics (P/E, EV/sales, EV/EBITDA, and P/B). During prior periods when real interest rates were 0%-1%, the forward P/E multiple averaged 11.2x, 33% below the current P/E of 16.7x. The Fed Model implies a year-end fair value of 2100 assuming the 10-year US Treasury yield climbs to 2.8% and the earnings yield gap narrows/equity risk premium falls and P/E remains at 16.7x. Note that our target would remain 2100 if interest rates remain unchanged from today’s level and the yield gap also remained constant. In prior tightening episodes, the P/E multiple has contracted by an average of 8% during the first three months following an initial Fed hike.
2. S&P 500 earnings will be essentially flat in 2015, rising just 1% ($1/share) from last year as Energy EPS plunges by 63% ($8/share). Our topdown EPS and margin forecast and bottom-up consensus are nearly identical. We estimate EPS of $114 and margins of 8.9%. Consensus equals $112 and 9.1%. Excluding Energy, 2015 S&P 500 EPS growth will equal 8%.
3. Domestic equity ETFs experiencing net outflows for the first time. US domestic equity mutual funds have witnessed net outflows in 8 of the last 9 years totaling $664 billion. But in prior years the outflow from actively managed mutual funds was more than offset by inflows into domestic ETFs. However, domestic ETFs have experienced YTD outflows totaling $6 billion. Domestic equity mutual fund YTD outflows totaled $90 billion. In contrast, international equity mutual fund and ETF inflows totaled $187 billion.
4. The US economy is expanding at an annualized pace of 3.0% based on our Current Activity Indicator (CAI), a real-time measure of GDP growth developed by our Economics research colleagues. We forecast GDP growth will average 2.6% during 2H 2015. Slack has diminished on many metrics. For example, the labor market has firmed with monthly payroll gains averaging 220,000 jobs during the past three years and the unemployment rate now stands at 5.3%. However, retail sales growth has been disappointing and inflation remains below the Fed’s target. Domestic sales represent 67% of the aggregate revenue of S&P 500 firms. Accordingly, nominal US GDP growth is the primary driver of sales growth. We forecast nominal US GDP growth of 3.3% and global ex-US growth of 3.2% in 2015.
All of which means one thing: Goldman is hoping to buy vol from any remaining clients who still have not had enough after many years of brutal muppeteering and are drawn like moths to a flame to that VIX 10 handle which for them will be proof that there is nothing to worry about (even as the credit market is approaching a Bear Stearns-like 2008 freakout) , and that the S&P will close 2015 anything but unchanged. Time to buy strangles.
»
- 18884 reads
- Printer-friendly version
- Send to friend
- advertisements -
Time to hang the fuckers.....
As opposed to gold and silver, which will continue to plunge.
The 500 year rally is just starting
Stock markets are poised go sharply down from here. The chinese stock market will probably pull the trigger in the coming weeks or months.
From here, gold seems to be going up towards 1140-1180. Where it goes from there is more difficult to say. There's the Peter Schiff-scenario where gold will go up because of QE4, and there's the Harry Dent-scenario where QE4 will be to small in correlation to the outstaning debt, and gold will continue to go down as it has the last years.
Whenever you hear them say "soft landing" or "sideways markets" you better start running for the exit.
100 points per year for two years?
The same? I want to see a 30-40% decline.
1. Goldman
2. Goldman
3. Goldman
4. Goldman
"buybacks remain robust and serve as a pillar of support"
Stock buybacks funded by debt issuance will grind to a halt when interest rates rise, probably at a moment determined by Mr. Market, not by Ms. Yellen.
eps is the maggots favorite metric these days. probably chosen at random. /s
The S&P will close much lower than the May highs. Paging Jan Hatzius, please bring the "shock cart" to NY Fed. stat.
Peter Schiff might be on to something. Rates in Corp and MBS lending are reflecting reality.
(stagflation)
I can see a scenario where China says, fuck it, we're done buying treasuries. I think Schiff is off the mark when it comes to China allowing the usd/cny trading band, that was tightened under 2 years ago, to use the float for more lateral exchange stability.
I see where Schiff is coming from, but he's not a seasoned currency trader.
when the article says the unemployment rate is 5.3% when 94 million people are out of work, and most the rest are part time low wage, or government subsidized work, then why even think the rest of the artcile holds a bit of truth....I think stocks will go down quite a bit by october...yellin is screwed whether she lowers the rates or not. Not lowering rates shows that all the economic recovery talk is nothing but lies, and raising the rates is, well, you know...However, here is my guess. She can raise the rates, just a tad, showing the economy is better without bringing down the entire system. So my bet is she rasies rates soon, but at a very small level....just a guess.
I got a down by a person who works for the government and cant get out of his IRA or pension plan...lol..
Hey, I viewed an article on naturalnews.com...the headline said : "california seizures: mandated vaccine seizures, ira and pension plan seizures, gold seizures, and gun seizures.
If people think that when precious metals go way up that the bankers will let you sell it, you have a serious problem not looking at history and how evil and powerful the bankers are. Pay attention and find the window to sell before they do, and still make a bit of money. It will be a small window so be diligent.
Now that we know the schtick that GS is using in its current round of muppeteering, we know that the S&P is either going to crash or go to the moon.
BTFD. While I profit off real world lending spreads.
Hey Blythe, how's things going in Santander Ville?
by the way, off topic kinda but oil is down another 50 cents...are we gonna hit a 41 dollar level?
More likely... the same for the rest of the DECADE. Continued morass. Continued waiting. Continued murky bullshit. The debtors run the asylum. I'm so sick of the lack of leadership, ethics, and accountability.
If only we could get John Hussman to have some control. Maybe the ZH crowd can evolve into some swell for action. Someone has to step up.
Reason 5: At the end of 2011 the FED connected infinite fiat through software to buy up the markets if they fall.
On GS, but otherwise off topic, why did GS pick up $8B in deposits through the GE acquisition last week?
Ten bucks says they smell a bail-in coming and want to partake in the free cash.
They might need it, just like they needed to bankrupt Lehman to trigger their CDS on Lehman (masking their own morbid toxic portfolio) and then getting 100% payout from AIG to further support their losses. Ever wonder how convenient it was that they moved to an FDIC firm and then didn't need to report Q4 of that year? The tree fell but no one was allowed to hear it.
Time will tell.
Screw goldman sachs, anyone can connect these dots - when a market becomes a system that is void of losers, there are no winners. The equity market (system) will be the new bond market. . . 2-3 percent returns. Bond market (system) zero returns, real estate market (system) zero return. Bottom line, stagnation, punk growth . . . let the markets clear, stop protecting mal-investment, to big to fail and players on the margin. . . stop the special interest lobbyist from having first dibs on the distress assets and give American first time buyers preference (like fannie Mae Homepath). We can get back to growth but only when we let things fail that should fail and provide an enviroment where new ideas and business can thrive. Look at the dow jones industrial components from say 1940, most of those companies are toast, today, they get bailed out because they have their hand in the politician's pocket. . .
Yutz, High Rabbi of Trinity Place
Lloyd Blankfein
"Screwing the muppets is the one God and Goldman is its beneficiary."
Kodesh HaKadashim - Holy of Holies.
Mort Goldman & Sy Sachs... Proprietors
http://www.chabad.org/library/article_cdo/aid/144745/jewish/The-Holy-of-...
(read this with your eyes closed lest you be blinded by an angry God.)
What a blathering gob of pure horse shit. Fairly valued. LMFAO. Just gots to wait for all the fundamentals to catch up to current market/price levels.
Based on that chart, 2016 is going to be a bang up year! ...the bullisht market continues
as a card carrying member of the PPT, goldman's sacks may just know why the s&p will remain unchanged the rest of the year
Rather than try to predict where the market is going to go, I have to think it's more useful to predict which type of trading is most likely to be rewarded and move to those time frames. I'd imagine day traders and swing traders will make the best of the coming conditions, but investors? After the best run in history, I'd say diminishing returns or a very bad run is on the horizon.
LOL, 3% growth of the economy? Ridiculous.