‘Then, The World Stopped’: Goldman Raises S&P Target By 20% After ‘Remarkable’ Six Months
"Despite" is a word that gets bandied about quite a bit these days.
For example: US equities managed to rise a third week despite escalating geopolitical tensions and seemingly intractable gridlock inside the Beltway.
Or, perhaps more poignant: the S&P briefly topped its record closing high from February despite concerns that the economic fallout from the worst public health crisis in a century is far from over as the US death toll mounts and Main Street disintegrates.
For their part, G
The eventual announcement of a vaccine, likely from an Operation Warp Speed locale like the Oval Office or the Rose Garden, will be the worse kept secret in stock market history. Stocks will rally on the rumors right up into the actual announcement, and perhaps even shortly thereafter. But then the reality of the mess we are still in — the deficit, lost jobs, diplomacy — will set in. That’s when the real bear market arrives.
Per your article, what does GS think happens when the economy grows 6%+ next year to interest rates? At the very least you get an extreme curve steepener- what is the second order effects for stocks? If they are correct, you have to think the 10 yr yield is up 100bps and mortgage rates up 75 bps, not to mention all the other rates. I would chalk this one up to magical thinking myself. They have modeled a world where everything goes right- I would like to know what the odds of that are? (1/4 tops right?). A more realistic and probable scenario involves a choppy recovery (50%?)- sometimes it would appear the Goldy guys are right, but I would bet against happy talk this fall. There is also a 1/4 chance things get worse well into next year- no vaccine for awhile and disease spikes in different places and different times around the country.
The coming election won’t simply be “contentious”, it will be FUBAR.
I think that risk off sentiment is likely to rise significantly with the approach of November. Positive developments regarding the pandemic may help offset market jitters to some extent even as social and political tensions mount. However, should Trump effectively ‘engineer’ a second term for himself, instability and unrest are likely to become permanent features of the socio-political landscape of the United States.
Some good points there Tom. Equally worrisome is that the incumbent loses but throws enough “I was robbed by the Comet Pizza cabal” that we suffer large-scale unrest from Trump’s base.
Based strictly on anecdotal evidence, much of the b increase in gun sales may be to center-left wing citizens rightfully alarmed by Trump’s base. I’ve been surprised how many acquaintances are finally arming up.
The Trump base had better work to increase the number of charging stations for their scooters.
Why? As Hitler learned during the eastern campaign, if an army outruns their logistics, their assault will grind to a halt.
Roll out those scooter chargers!
To offer a little contextualization, the last time there was a remotely similar setup, in 2008 during the GFC, Goldman’s chief forecaster ended up being too bullish by about 80%. Which to me suggests their forecast now ought to come with something like a 50% confidence interval, taken for what is worth but perhaps no better than a random guess. It may be unfair to single them out, but they do occupy a particular position in the know-it-all class and Professor H has created a haven for scepticism. https://www.reuters.com/article/us-financial-summit-cohen-record/goldmans-abby-cohen-defends-her-forecast-record-idUSTRE55I5OK20090619
I mean, it’s always just a guess in any given year.
And 30 million unemployed just don’t matter.
As investors, in every cycle, we typically internalise a couple of truisms that turn out to be anything but. For the past several months, the market has been convinced that the economic crisis will end (or at least see the beginning of the end) when a vaccine becomes available.
But if large swathes of the US remain unconvinced of the safety of the MMR jab, a vaccine that has been routinely administered for almost 50 years, how many are going to be convinced by a new vaccine that has been rushed through in a matter of months? I’m generally pretty scathing about the anti-Vaxxer crowd, but even I’d want to think twice before signing up.
It seems to me the markets are undergoing a frog cooking exercise. When the frog will be recognized as dead is anybody’s guess.