(Bloomberg) — Goldman Sachs Group Inc. suggests that the recent pessimistic outlook on US economic growth presents a buying opportunity for stocks if it continues substantially. In a note on Friday, Goldman strategists, led by David Kostin, highlight concerns about the under-performance of cyclical equities and the potential impact of tightened financial conditions on economic growth. However, they maintain that the US economy will remain resilient, indicating that sectors like financial services, semiconductors, and materials may still perform well. The strategists express the belief that any further downgrade to the growth outlook would be a chance to buy stocks, despite persisting headwinds on discount rates and balance sheets.
This sentiment follows the 10-year Treasury yield rising above 5% on October 23, the first time since 2007, as the Federal Reserve maintains higher interest rates to combat inflation. RBC strategist Lori Calvasina states that the broader market is unlikely to stabilize until the surge in yields subsides. Kostin had previously warned that higher rates might impact US profits, and other strategists at institutions such as Morgan Stanley and JPMorgan Chase & Co. have cautioned about a deteriorating earnings outlook.
Kostin predicts that the S&P 500 will end the year at 4,500, slightly exceeding the average forecast of 4,370 among Bloomberg-tracked strategists. The index closed at 4,117.37 on Friday, down 10% from its peak in late July. Shortly before reaching that peak, Kostin had stated that the benchmark’s high valuation was reasonable and could increase further by year-end.
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