Strategists at the Wall Street giant, Goldman Sachs Group, cut their target for the S&P 500 index for the second time in a month, pointing to negative returns for the year, following the global commodities crisis triggered by Russia’s invasion of Ukraine deepened the decline in US stocks.
“The biggest risks come to profits,” wrote strategists led by David Kostin, in a note to clients S&P 500 from the rise in commodity prices, and consequently weak consumer demand and economic growth,” according to “Bloomberg” and reviewed by “Al Arabiya.net.”
They also revised their expectations for the main US stock index target by the end of the year to 4700 points from 4900 points previously. Strategic analysts now expect earnings per share to grow 5% annually to $221 in 2022 on average, down from an earlier estimate of 8% at $226.
It comes following Goldman Sachs lowered its first year-end target of 5,100 points for the S&P 500 last month, following a crash triggered by fears that the Federal Reserve will have to tighten policy more aggressively than previously expected to tame rising inflation.
Meanwhile, the selling intensified, as a wave of sanctions once morest Russia, one of the world’s largest commodity producers, over its invasion of Ukraine exacerbated price pressures.
The recent pullback means that Goldman’s revised target is still seeing a 10% increase from current levels.
On a full-year basis, expectations are for marginally negative returns for US stocks, a far cry from the precipitous rally of 2021 that saw stocks climb to consecutive record highs.
And the worst may be yet to come, as economists at the Wall Street giant see a 35% chance of a recession next year.
In their note, Goldman strategists said recession risks are “partially priced” at current levels. “In a bearish scenario, we expect lower earnings and valuation multiples to drive the S&P 500 down 15% to 3600,” they added, recommending investors maintain excess positions in the energy and healthcare sectors to weather the storm.
