Latest News

Goldman Slashes S&P 500 Target Citing Higher Fed Rates Path

0

S&P Futures

3,745.50

-26.50(-0.70%)

 

Dow Futures

29,969.00

-180.00(-0.60%)

 

Nasdaq Futures

11,468.25

-97.25(-0.84%)

 

Russell 2000 Futures

1,712.90

-14.90(-0.86%)

 

Crude Oil

81.68

-1.81(-2.17%)

 

Gold

1,670.00

-11.10(-0.66%)

 

Silver

19.46

-0.16(-0.80%)

 

EUR/USD

0.9759

-0.0079(-0.80%)

 

10-Yr Bond

3.7080

0.0000(0.00%)

 

Vix

27.92

-0.07(-0.25%)

 

GBP/USD

1.1185

-0.0070(-0.62%)

 

USD/JPY

142.8980

+0.5630(+0.40%)

 

BTC-USD

19,112.58

-47.54(-0.25%)

 

CMC Crypto 200

438.15

+10.63(+2.49%)

 

FTSE 100

7,076.07

-83.45(-1.17%)

 

Nikkei 225

27,153.83

-159.30(-0.58%)

 

Goldman Slashes S&P 500 Target Citing Higher Fed Rates Path

(Bloomberg) — Goldman Sachs Group Inc. slashed its year-end target for the S&P 500 Index to 3,600 from 4,300, arguing that a dramatic shift in the outlook for interest rates moving higher will weigh on valuations for US equities.

Most Read from Bloomberg

Japan to Restore Visa-Free Travel From Oct. 11 as Covid Pandemic Recedes

South Korea President Caught on Hot Mic Insulting US Congress

Unless Rents Rise, Housing Is Set Up for an Epic Crash

A Great Copper Squeeze Is Coming for the Global Economy

Putin’s Order for 300,000 Fighters Drives Russians to the Streets in Protest

The higher interest-rate scenario in Goldman’s valuation model supports a price-earnings multiple of 15 times, compared with 18 times previously, strategists including David J. Kostin wrote in a note on Thursday. “Our economists now forecast the FOMC will raise the policy rate by 75 bp in November, 50 bp in December, and 25 bp in February for a peak funds rate of 4.5%-4.75%.”

Goldman said the risks to its latest forecast are still skewed to the downside because of the rising odds of recession — a scenario that would reduce corporate earnings, widen the yield gap and push the US equity benchmark to a trough of 3,150. Federal Reserve Chair Jerome Powell has signaled that he would risk a recession to fight inflation, spurring fears that central banks may derail global growth.

Equity valuations and real yields have moved in lockstep for the past few years but that relationship has recently dislocated, posing a risk to equities, the US investment bank said. It had previously assumed real rates would end 2022 at roughly 0.5%, compared with an assumption of 1.5% now.

A majority of equity investors have adopted the view that a hard landing scenario is inevitable and their focus is on the timing, magnitude, and duration of a potential recession, Kostin and his colleagues wrote. Under such a framework, the 3-, 6-, and 12-month S&P 500 targets work out to 3,400, 3,150, and 3,750 respectively, they said.

To be sure, the S&P 500 has underperformed the Stoxx Europe 600 Index since Sept. 12, when Kostin and his team said they saw the US as a safer bet than Europe. They also say a year-end rally in the US equity gauge to 4,300 is possible if inflation shows clear signs of easing.

Goldman’s new base-case target implies a 4.2% drop in the US equity benchmark from Thursday’s close. It forecasts 6-month and 12-month targets for the gauge at 3,600 and 4,000, respectively.

The US bank like many of its peers advises that elevated uncertainty calls for defensive positioning from investors and they should own stocks with quality attributes such as strong balance sheets, high returns on capital, and stable sales growth.

(Adds additional commentary starting in fifth paragraph.)

Most Read from Bloomberg Businessweek

The Sneaky Genius of Apple’s AirPods Empire

This Is What Life’s Like in the World’s Strictest Covid Zero City

Wall Street’s Bosses Reassert Themselves With the Return of Annual Culls

No One Likes Annual Performance Reviews—Here’s How to Get Rid of Them

The $8.6 Billion Startup That Helps Governments Trace Crypto

©2022 Bloomberg L.P.

Advertisement

Bloomberg

The Era of Inflation Has Ended — for Asset Prices on Wall Street

(Bloomberg) — As the Federal Reserve’s intensifying fight against inflation sinks every asset on Wall Street, investors are asking: Why buy now when things could get cheaper still? Most Read from BloombergJapan to Restore Visa-Free Travel From Oct. 11 as Covid Pandemic Recedes South Korea President Caught on Hot Mic Insulting US CongressUnless Rents Rise, Housing Is Set Up for an Epic CrashA Great Copper Squeeze Is Coming for the Global EconomyPutin’s Order for 300,000 Fighters Drives Russians

TipRanks

J.P. Morgan Storms Into the LiDAR Space; Here Are 2 Stocks That the Banking Giant Likes

With the objective of providing a high-resolution 3D view of their environment, LiDAR (light detection and ranging) sensors are set to be a mainstay in autonomous vehicles. While not all have been proponents of the technology – Elon Musk, for one, has stated in the past that he is not a fan – J.P. Morgan analyst Samik Chatterjee says the “debate around value-add of a LiDAR in a sensing suite has been long settled.” The decision to forgo the use of lidar more revolves around costs rather than per

Investor’s Business Daily

5 Best Chinese Stocks To Buy And Watch

Hundreds of Chinese companies are listed on U.S. markets. But which are the best Chinese stocks to buy or watch right now? Among the best are Nio, Baidu, Li Auto, Pinduoduo and BYD Co.. China is the world’s most-populous nation and the second-largest economy, with a booming urban middle class and amazing entrepreneurial activity.

TipRanks

‘It’s Time to Buy on the Dip’: Cathie Wood Snaps Up These 2 Stocks Under $10

On Wednesday, the Fed bumped up interest rates again, its third 75-basis point hike since June, and signaled that there could be two more such hikes by the end of this year. The conventional wisdom has the Fed acting properly, and aggressively, in an attempt to counter inflation raging at 40-year high levels. But conventional wisdom isn’t always right – and we can learn a lot by consulting the contrarians. Few top investors are more contrarian than Cathie Wood. The founder and manager of ARK Inv

MarketWatch

The Fed raised rates — retirees and near-retirees should do this

Retirees have to watch their spending, especially after the Federal Reserve’s latest rate hike announced on Wednesday. For the third time in a row, the Federal Reserve said on Wednesday it would raise the benchmark federal-funds rate – this time, by a 0.75 percentage point so that it hovers between 3% to 3.25%. The news may seem unsettling for retirees, in particular, many of whom are living on fixed incomes.

Investor’s Business Daily

How To Lock In $75,000 Worth of 9.62% Treasury I Bonds

You have just a few weeks to pounce on Treasury I bonds’ sky-high interest rate. Also called Series I savings bonds, their interest rate is 9.62%.

The Wall Street Journal

Audits of Chinese Companies Start to Face U.S. Inspections

The Public Company Accounting Oversight Board is to determine whether Alibaba, Yum China and other firms can keep their listings on American stock exchanges.

Insider Monkey

10 Stocks to Buy According to Bulldog Investors

In this article, we discuss 10 stocks to buy according to Bulldog Investors. If you want to skip our detailed analysis of the fund’s history, investment philosophy, and performance, go directly to 5 Stocks to Buy According to Bulldog Investors. Phil Goldstein, a former civil engineer, and Steve Samuels, a securities analyst, founded the New […]

Barrons.com

The Fed Signals More Pain. Volatility Is Sticking Around Too.

More job cuts in tech as Fed sees unemployment rising, existing home sales have dropped seven straight months, BP refinery explosion in Ohio leaves two fatalities, and other news to start your day.

Benzinga

5 High-Dividend REITs Now Trading Below Book Value

The following real estate investment trusts (REITs) are interesting because each one bears a balance sheet not too different from those considered desirable in Benjamin Graham’s classic “The Intelligent Investor.” Graham, of course, is deemed the father of value investing and greatly influenced Warren Buffett, his student at Columbia University. Each of these REITs is trading at a discount to book value, and each one is paying a dividend of some kind. Obviously, there’s a lot more to consider bu

Bloomberg

Strategists Throw in the Towel on a Year-End Stocks Rally in Europe

(Bloomberg) — Strategists are giving up on a year-end rally for European stocks.Most Read from BloombergJapan to Restore Visa-Free Travel From Oct. 11 as Covid Pandemic Recedes South Korea President Caught on Hot Mic Insulting US CongressUnless Rents Rise, Housing Is Set Up for an Epic CrashA Great Copper Squeeze Is Coming for the Global EconomyPutin’s Order for 300,000 Fighters Drives Russians to the Streets in ProtestForecasts for the Stoxx 600 Index have fallen by about 5% in the past month,

J.P. Morgan Storms Into the LiDAR Space; Here Are 2 Stocks That the Banking Giant Likes

Previous article

European Stock Futures Mixed; U.K. Set to Deliver ‘Mini Budget’

Next article

You may also like

Comments

Leave a reply

Your email address will not be published.

More in Latest News