According to the latest reports of the American multinational investment bank and financial services company Goldman Sachs, the stock market is expected to move through less pain compared to 2022 but this does not mean that there will be any growth or profits.
The companies are calculated to have anemic earnings growth all throughout 2023. In their note which was presented on Tuesday, the bank shared the possibility that while the performance of U.S stocks in 2022 was associated with painful valuation de-rating, the equity scenario of 2023 will be associated with the lack of corporate earnings growth.
The calculations put forward by the firm also suggest that the earnings per share in the S&P 500 will be $244, holding steady there, in the coming year and also that there will a decline of 2% to 3,900 in the course of the coming six months. All the speculations and probabilities are put forward by the company by assuming that the Federal Reserve will be able to have a grasp over the economy and thereby avoid a potentially harmful recession.
The Wall Street’s leading investment bank’s three months target for the index is 3,600 which is almost about 10% down from its current level as per Friday’s close and the six-month target is about 3,900 which is 3% down from the current level.
The best-case scenario for the company is making no profit in the stock market. The hike in the rate of the Fed can result in a huge downturn for the US economy in 2023, the effect of the downturn can result in sending the S&P 500 down to 3,150 in the early half of 2023 itself, which is almost about 20% below the current level.
To quote the note made by Goldman, it read “In a downside scenario, the delayed impact of cumulative Fed tightening or an exogenous shock pushed the U.S economy into recession and causes the S&P 500 EPS to decline.”
According to the words of Kostin and his team, their expert economists believe that it will be clear by early 2023 that recession is declared and that the magnitude of the hikes will be reduced by the Fed which will eventually result in the stopping the tightening, after the FOMC meeting in May.
Goldman also put forward suggestions that say the Fed will continue to increase the rate by another 125 basic points which are calculated to reach the target of 5.0% – 5.25% in May 2023. Taking the speculations and possibilities into consideration, some of the experts suggest that the rising interest rate, which can overtight the economy has a high chance of sending the United States into a possible recession.
Many eminent personalities who are expert in the field of economics like Jeremy Siegel, who is a professor at the Wharton, and Paul Krugman, who is a Nobel laureate has shared their doubt and concerns regarding the situation.
Goldman Sachs is an American multinational company, which offers different types of services like investment banking, asset management, prime brokerage, and so on. The company had been in much prominent news and has also been linked to many controversies and legal issues too.
The company had been crucially criticized in the aftermath of the financial crisis which took place in the 2007 – 2008 time period. The criticism arose after people started doubting the firm in misleading its investors and that they profited from the collapse of the mortgage market.
Other than this, the name of the company had also been associated with many different controversies such as the stock price manipulation case associated with Exodus communications, the use of offshore tax havens, and even the involvement in the European sovereign debt crisis.
The company has also been the lead bookrunner of notable initial public offerings for large establishments like Twitter, Bumble, and the Robinhood markets.
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