S&P 500 index could tumble to 3,150 if recession hits – Goldman Sachs

David Kostin, Equity Strategist at Goldman Sachs outline various scenarios for the S&P 500 index, predicting it to fall further to 3,150 levels.

Key quotes

“Base case forecast valuation is expected to remain roughly flat while earnings growth does the heaving lifting and pushes the S&P back to 4300 at year-end 2022.”

"Inflation surprises like this morning’s will also affect the path of multiples, for better or worse."

“Some of the economic developments that have boded well for the Fed’s battle with inflation have intensified concerns about the earnings outlook."

“Valuations dominated investor focus in early 2022, but recent client conversations have centred on risks to EPS estimates.”

“Margins have driven the majority of recent analyst cuts, estimates still appear too high.”

“Expect S&P 500 net margins excluding Financials and Energy will slip from 12.7% in 2021 to 12.6% in 2023.”