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Goldman Slashes S&P Target, Says ‘Investors Have Been Mauled’
Investors "have been mauled," Goldman's David Kostin said, looking back on what, so far anyway, is a truly regrettable year for equities and a potentially epoch-making macro moment for bonds.
I'll save readers some suspense. I won't bury the lede. Goldman cut its S&P target to 4300 from 4700 (figure below).
Goldman's new price target implies modest upside by year-end. Thanks to Friday's rally, Kostin's three-month target (4000) implies no near-term upside, consistent with the notion that,
The beatings will continue until morale improves.
Strategists’ bearish scenarios have recession starting in 2023. Yet 1Q GDP was negative, which is already halfway to a common definition of recession. Are we redefining “recession”?
We’re not redefining, just whistling past the graveyard.
Yeah, this is a good question. It’s not too difficult to imagine a scenario where the US bounces around between quarterly expansions and small contractions as all of this gets sorted out, which could put the economy in the same boat as the S&P, where you have — you know — a 17% drawdown, and then a 5% rally, and then another bad week, followed by some sideways chop and then another swoon, and finally you’re left to think “This is a bear market — I don’t care if it meets the technical definition, because it’s definitely a bear market in spirit.”
Wall Street (consensus) is not unexpectedly (because they sell the dream) overly optimistic. In Q1 didn’t really downgrade enough to account for global macro events (war in ukraine, covid lockdowns in china).
Every time the Fed push the market gives, so the “consensus” is also ignoring that the Fed is definitely going to push a couple more times. (June .50, probably July .50)
The Fed needs inflation numbers to decrease (a whole separate conversation on whether blunt demand destruction is the healthy way to achieve this)…
So the S&P that’s likely to drop another 10% (mechanics due to the Fed raising rates), how does one get from 3600 up to 4300 in a recession in H2?
H-Man, in this cycle, the market will push down (not sure we are there yet) but then rebound and the next leg is when it gets really ugly. Then we will see the light at the end of the tunnel. We are getting closer to the end but more like the third station of the Cross.