According to the investment bank’s baseline forecast, the S&P 500 will end next year at 4,000p, which is almost the same as the current value of the index.
– At the same time, the combined earnings per share and forward P/E of companies in the index are expected to reach $224 and 17x, respectively, which is in line with current performance. Analysts also note that the S&P 500 could fall as low as 3,600p in the next three months.
– Goldman Sachs in its baseline scenario assumes that the U.S. economy will be able to make a “soft landing” and the Fed will end the cycle of tightening monetary policy in May 2023. In that case, GDP growth should be below trend and would be accompanied by an increase in unemployment to 4.1% from the current 3.7%.
– At the same time, the investment bank does not rule out a “hard landing” of the economy and the beginning of a recession. If that happens, the S&P could hit a new “bottom” at 3,150 points.
What should investors do? – Goldman Sachs recommends paying attention to stocks from defensive sectors such as communications services, health care and consumer staples, which tend to outperform in a slowing economy.
– Analysts also like the outlook for the oil and gas sector, which has historically performed positively during periods of stagflation.
– That said, Goldman Sachs recommends against investing in the utilities sector. Although it is defensive, the current valuation indicates that it is significantly overbought.
– Among other things, strategists believe it is worth paying attention to the shares of certain companies that have historically demonstrated outperformance during periods of slowing inflation. Investbank made a selection of such securities:
#Organon #OGN Citigroup #C Verizon #VZ Walgreens Boots Alliance #WBA Prudential Financial #PRU Alaska Air Group #ALK Davita #DVA Microchip Technology #MCHP Lowe’s #LOW Booking Holdings #BKN