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Investors ‘Unusually Fearful’ Ahead of Earnings – Goldman Sachs


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Goldman Sachs strategist John Marshall says that single-stock options market positioning suggests that investors are “unusually fearful” ahead of the earnings season.

Investors are particularly fearful of a downward revision cycle that may come after markets suffered three big shocks – rates, Ukraine, and commodities.

“Single stock put-call skew is in its top quartile relative to the past year, suggesting elevated investor risk aversion. Our studies show that when fear is high, the S&P 500 tends to see elevated returns. Based solely on this metric, we would expect the S&P 500 to trade up +3.6% in the next three months,” Marshall said in a client note.

Still, Goldman Sachs expects stocks to finish this quarter over 6% higher and around 15% upside over the next 12 months.

“Our analysis of nine statistically significant flow variables suggests the S&P 500 should be 6% higher than current levels. Strong ETF flows have continued and incremental hedge fund flows have turned positive over the past two weeks,” Marshall added.

Goldman strategists picked 25 stocks that could outperform during the earnings season, including Walmart (NYSE:WMT), JPMorgan (NYSE:JPM), Moderna (NASDAQ:MRNA), and Datadog (NASDAQ:DDOG).

“Our analysts see increased potential for upward revisions in Financial and Industrials, while they expect lower margins to pressure many Consumer stocks.”

On the other hand, First Solar (NASDAQ:FSLR) and Intel (NASDAQ:INTC) are seen as at-risk stocks heading into earnings.

By Senad Karaahmetovic

Investors ‘Unusually Fearful’ Ahead of Earnings – Goldman Sachs

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