S&P 500 to peak in 1Q at 2400 and end the year at 2300 – Goldman Sachs
|Goldman Sachs Investment Research team came out with their latest report on the US equities this Monday.
Key Quotes:
“It has been a year since the last 10% US equity market drawdown but long periods of stability are not good indicators of drawdown risk.”
“In recent years, investors have bled premium by hedging positions while stocks continued to climb. Looking ahead, the distribution of market outcomes appears asymmetrical.”
“Near-term downside catalysts include
1. investor recognition that lower corporate tax rates may not take effect until 2018;
2. multiple Fed hikes;
3. European elections.”
“We forecast S&P 500 will peak in 1Q at 2400 and end the year at 2300. Given extremely low volatility, investors should replace long equity positions with calls or sell unlikely upside to fund protection.”
“The clearest potential tailwinds for S&P 500 upside include government policy and acceleration in US economic data, but neither catalyst looks likely. Investor optimism in recent months has been driven in large part by hopes for lower corporate tax rates. However, our Washington, D.C. analyst believes the political climate suggests that tax reform likely will not go into effect in 2017.”
“Meanwhile, recent economic data have been strong, but the high level of our economists' MAP index of data surprises as well as the 3.6% pace of US economic growth signaled by their Current Activity Indicator place a high bar for upcoming data releases to maintain the current pace of economic acceleration and drive further share price appreciation.”
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