A Goldman Sachs sign is visible on the company post on the floor of the New York Stock Exchange.
REUTERS / Brendan McDermid
Goldman Sachs raised its price target at the end of 2019 for the US S&P 500 Index by 3% to 3100 points on Tuesday, but revised its earnings estimates, citing economic weakness activity and margin views.
In a research note, the Wall Street giant lowered its 2019 EPS for the $ 6 index. EPS is an important metric for traders that is used to measure the value of stocks. Earlier this year, he predicted that 201
But despite the contraction in profits, it is still positive for a further rise in the stock markets. The new target for the S&P 500 assumes a 24% year-over-year profit for 2019. It also sets a price target at the end of 2020 of 3,400, a 10% increase over the 2019 target.
to the stock market rally in 2019 and we expect low interest rates to continue to support above average forward rates, "the note said.
The overall forecast will allow the US stock market to extend a decade for the bull to run another year and break the record for the day published last week. The S&P 500 closed on Monday at 3020 points.
Investors expect the Federal Reserve to cut interest rates by a quarter point on Wednesday, with some analysts pricing a further decline before the end of the year.
Goldman analysts have proposed several investor strategies, including "adding selective exposure to cyclical securities as transports" with the expectation that "easy financial conditions, among other factors, should lift US economic growth from declining rates from 1% in June. "
The note also suggests that exposure to global politics and the 2020 elections in the US make health care stocks uniquely vulnerable to political risk. In the sector, however, Goldman analysts point out that investors are focusing excessively on Medicare for All, linked to the risk of drug price regulation, and recommend favoring providers and services over medicinal products while maintaining a common position for "underweight" weight "in healthcare.  More bullish prospects for 2020
The better 2020 forecast focuses on Goldman's forecast that US growth and the global economy will recover modestly next year. Economists expect US real GDP growth to grow from 1.7% in the third quarter of 2019 to 2.5% in the second quarter of 2020, corresponding to low single-digit profit growth.
Based on the top-down Goldman model, each 100 basis points change in real GDP growth in the United States equals about $ 5 from the S&P 500 EPS.
Economists also expect margins to fall in 2019 but recover modestly in 2020. In 2015, S&P's net profit margin peaked at 11.3% in 2018, a combination of strong revenue growth and tax review, but declined in the first quarter of 2019. The note attributes this to the cost inputs weighing on profitability and the "industry-specific dynamics among semiconductor companies" dragging on the aggregate index.
Goldman forecasts a contraction of 39 basis points in 2019, which recovers to an increase of 14 basis points in 2020 as "economic growth accelerates and the semiconductor cycle improves", although this remains below the consensus estimate of +65 basis points.