Goldman Sachs: Buy These Stocks Because S&P 500 Yields Could Halve As U.S. Economy Peaks
Stocks got back on the horse on Wednesday, with the Dow Jones and S&P 500 indexes ending at their second-highest level ever, as investors continued to smile at the strong outlook for economic growth. Much of that momentum continued on Thursday.
Goldman Sachs strategists are bullish on the U.S. economy, expecting annualized sequential U.S. gross domestic product growth of 10.5% in the second quarter of 2021. That would be the rate of highest quarterly growth since 1978 (excluding surge in mid-2020). end of 2020, when the economy rebounded from a sudden stop).
But that may not be good for stocks. Our call of the day is from the Goldman Sachs team, led by Ben Snider, who warn that as economic growth peaks, investors should expect lower stock returns and higher volatility.
Investment banking economists see U.S. GDP growth slowing slightly in the third quarter of this year before continuing to decline in coming quarters.
“Growth deceleration is typically associated with lower, but still positive, stock returns and higher volatility,” the strategists say. Since 1980, the S&P 500 SPX,
recorded average monthly returns of 1.2% when economic growth was positive and accelerating, but only 0.6% when growth was positive but decelerating.
In fact, stocks underperform just when growth peaks. Investors who bought the S&P 500 when the Institute for Supply Management’s manufacturing index was above 60 – signaling peak growth, strategists say – saw median returns of -1% the following month and just 3 % the next year. In March, the ISM manufacturing index reached 65.
But it’s not all bad news. Outside of the United States, the global economy is still on a tear. Goldman Sachs economists expect economic growth in Europe, Japan and emerging markets outside China to peak later than in the United States – in the third quarter of this year. “As a result, some cyclical parts of the U.S. stock market should fare better in the months ahead than they typically do when U.S. growth begins to slow,” the strategists say.
has two tips: buy globally oriented cyclicals versus domestically oriented cyclicals and buy a basket of “reopening Europe” stocks, which have lagged behind “reopening” stocks. the United States “.
US stocks spent much of the day mixed but closed lower on DJIA,
UKX European Stocks,
rose on Thursday amid a flurry of strong earnings reports, but it was Tokyo that led the way higher among Asian shares HSI,
after the Nikkei 225 NIK,
jumped 2.4% after two days of losses.
Our chart of the day shows the rise in sustainability reporting among S&P 500 companies. In honor of Earth Day, learn more about what it means and find out six more charts showing the “greening” of the S&P 500.
(JET) fell more than 4%. This sparked a bizarre exchange between the chief executives of the two companies, initiated by JET executive, Dutch billionaire Jitse Groen.
How tiny “beach huts” has become the hottest product in British property.
Tra-la-la: A $13,000 flute that disappeared almost a decade ago in a taxi was returned to its owner after police recovered it from a Boston music store.
Need to Know starts early and updates until the opening bell, but register here to receive it once in your e-mail box. The email version will be sent around 7:30 a.m. EST.
Want more for the day ahead? Subscribe to Barron’s Dailya morning investor briefing, featuring exclusive commentary from Barron’s and MarketWatch editors.