Here’s what Goldman Sachs gives the S&P 500 a 90% chance over the next decade

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The debate over whether the markets were at the top lasted a whole day after Tuesday’s rally put the bears back in their dens. Positive vaccine news could be released on Wednesday.
A little further, the strategists of Goldman Sachs, led by David Kostin. They believe that the S&P 500 SPX,
+ 1.34%
will generate average annual returns of 6%, including dividends, over the next 10 years.

Not bad is not it? Of course, any long-term forecast is subject to considerable uncertainty, and yields between 2% and 11% capture a standard deviation around its average estimate, say Goldman strategists. Goldman did a similar exercise in July 2012 and predicted a return of 8%, compared to the actual gain of 13.6%, which was more than one standard deviation.
How did the Goldman team reach 6%? They looked at five factors – today’s absolute and relative valuations, equity allocations, dividend yield estimates and economic modeling. To make a long story short, the cyclically adjusted price / earnings ratio is high at 26.5, but interest rates are incredibly low.

Perhaps the most notable idea is that stocks have a 90% chance of beating bonds, from the 10-year Treasury TMUBMUSD10Y,
0,643%
gives a puny 0.63%.

Goldman highlighted five risks to the outlook. One is de-globalization, which jeopardizes sales and profits. Another is taxes, with current Presidential President Joe Biden’s plan for a 12% drop in profits for the S&P 500, if implemented. Labor costs, demographics and the composition of the index – the S&P 500 has averaged 35% turnover per decade since 1980 – are also risks.
Buzzing
Moderna MRNA biotechnology group,
+ 4,54%
said his coronavirus vaccine candidate has produced a “robust” immune system response in a larger group of people and that the study will move to a landmark clinical trial in July. Meanwhile, a British TV broadcaster has reported positive news about the AstraZeneca AZN-supported vaccine from the University of Oxford.
+ 1.39%
can be released.
In the United States, rates of positive coronavirus tests remained at around 8%, although the new number of deaths increased sharply on Tuesday.
Apple AAPL,
+ 1,65%
won its case against the European Commission, the General Court of the European Union ruling that Ireland has not provided state aid to the tech giant. The decision means that Apple will not have to pay $ 15 billion in taxes to Ireland.
Wednesday’s profit wave features health insurer UnitedHealth UNH,
+ 2.94%,
who reported higher-than-expected profits, and more financial sector results, including The Bank of New York Mellon BK,
+ 0,28%,
Goldman Sachs GS,
+ 2.45%
and PNC PNC,
-1,38%.
Bespoke Investment Group analysts say major banks that reported on Tuesday have set aside provisions for loan losses equivalent to 15% of their market capitalization – which would give a potential boost if their clients’ actual losses were still slightly below expectations.
Industrial production, which in May did not rebound as much as retail sales, is to be published, as well as the manufacturing index of the Empire State and the Beige Book of economic anecdotes of the Federal Reserve Board.
The steps
After Tuesday’s 556 point increase in the Dow Jones Industrial Average DJIA,
+ 2.13%,
US stock futures ES00,
+ 1.22%
YM00,
+ 1,56%
pointed even higher.
Oil futures CL.1,
+ 1.24%
advanced slightly before the meeting of the Organization of the Petroleum Exporting Countries.
GC00 Gold Futures,
-0,26%
relaxed.
Table

This chart, from Acadian Asset Management, shows the best and worst performing assets over four-year rolling periods since the mid-1970s. “From this point of view, the recent outperformance of large cap growth does not does not seem particularly unusual either in terms of duration or scale, ”says the fund manager. “In addition, the graph reminds us that recent successes can quickly become underperformers as conditions change. “
Le tweet

The daughter of the White House president and senior advisor brandished a box of Goya beans in the style of “The price is right”, which also made the game show trending on Twitter. Goya’s CEO lavishly congratulated President Donald Trump, triggering calls for a boycott of the food company. Not to be outdone, Ivanka Trump’s brother Donald Jr. tweeted that former Vice President Biden couldn’t beat his younger brother Barron during a debate.
Random readings
Former Attorney General Jeff Sessions has lost his Republican nomination to the Senate seat he previously held in Alabama.
New artwork inspired by graffiti artist Banksy’s coronaviruses has appeared in the London Underground.
Hit the road – an unusual white dwarf star has been zoomed across the Milky Way galaxy.
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