Anyone expecting a surge in market volatility as Mario Draghi recently warned, will be disappointed to read Goldman’s latest forecast which not only does not budge on its year end S&P forecast of 2100, but predicts that the market will be flat as a pancake for the balance of the year.
Here is Goldman’s assessment of why one may as well take the rest of the year off:
The most likely path of the US stock market during the next six months is sideways. We forecast the S&P 500 index will end 2015 at 2100, roughly unchanged from the current level. S&P 500 delivered a compound annual price return of 18% during the past three years and 13% during the past five years, both well above the long-term average annual return of 5%. Mean reversion is a powerful force. Put simply, “flat is the new up” when it comes to the future path of the US stock market.
And here are Goldman’s four reasons why the bank expects the S&P 500 will end 2015 unchanged from the current level: High starting valuation, negligible earnings growth, outflow from domestic equity mutual funds and ETFs, and modest economic growth. Offsetting these headwinds to a higher market, buybacks remain robust and serve as a pillar of support in the current environment.
Finally, Goldman adds that its “sentiment indicator stands at 0, implying a tactical rally is likely during the next month.” So… expect a plunge?
Here are the four reasons with more detail: