Goldman Sachs Says Sell-Off Consistent With Past Corrections, Sees S&P 500 at 1,300
Despite the recent 12% market sell-off, Goldman Sachs' U.S. equity strategists have not altered their fundamental view that U.S. stocks will go higher. They see the S&P 500 rising to 1,300 mid-year, before ending the year at 1,250.
Lost in the headlines is that the S&P 500 is up 60% from its trough in March 2009, Goldman notes.
While the firm recognizes the European risk, they said only 10% of the S&P 500's revenue comes from Europe, Middle East and Africa combined.
Goldman Sachs said this pullback is consistent with sell-offs that occurred in recoveries following bottoms in 1974, 1982, 1987, 1990 and 2002. The firm's data shows that multiple sell-offs of between 7% and 15% occurred during the first two years of these recoveries.
According to the firm's data:
- The October 1974 correction had three corrections of 5% or more, with the median correction 13.6%.
- The August 1982 correction had three corrections of 5% or more, with the median correction 6.9%.
- The December 1987 correction had six corrections of 5% or more, with the median correction 7%.
- The October 1990 correction had six corrections of 5% or more, with the median correction 5.9%.
- The October 2002 correction had three corrections, with the median correction of 8.2%.
- This correction (March 2009) has had five 5% or more corrections so far with the median correction of 7.1%.
They also said the correction has been orderly as "sector returns have been exactly in-line with beta-adjusted expected performance." Telecom Services was the top performing sector down 3.4% while Financials was the worst performing sector down 9.7%.
The firm has a top-down EPS forecasts of $76 for 2010 and $90 for 2011, representing growth of 33% and 20%, respectively.
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