Catenaa, Monday, March 03, 2025- Goldman Sachs says any rebound in the S&P 500 Index is likely to prove temporary amid concerns about the US economy as earnings growth for the year is revised to 9% from 11%.
In a note on Monday, Goldman Sachs Strategist David Kostin said investor exposure declined last week as the benchmark briefly erased its 2025 gains, but it isn’t low enough yet to suggest “tactical upside as a result of depressed positioning,”
“An improvement in the US economic growth outlook will be required to fully reverse the recent equity market weakness,” the strategist said, while reducing his full-year earnings growth estimate to 9% from 11%.
For 2025, he says “equity returns will be more modest than last year and match the trajectory of earnings growth.”
The S&P 500 fell by 1.87% in February, although the index has gained 1.24% YTD, while the MSCI All-Country World Index excluding the US has rallied 5%.
US stocks have faltered this year on worries about lofty valuations for the technology behemoths.
Investors have also questioned if President Donald Trump’s America-First policies are likely to stoke inflation and lead to a slowing economy.
Goldman’s Managing Director for Global Markets and Tactical Specialist, Scott Rubner, separately said he lacks conviction that demand for stocks is high enough to sustain a rebound. Rubner turned bearish last month amid fading inflows from retail and other buyers. He notes the market is in the final stages of a clearing in positioning.
Morgan Stanley strategist Michael Wilson — a prominent bearish voice until mid-2024 — also said equities are likely to be more sensitive to economic growth than to a pullback in bond yields.
