11:30 pm – Received an email from one of our graduates – Seow !
GOLDMAN SACHS 2010 INVESTMENT OUTLOOK – THE BULL WILL CONTINUEThe rally is going to continue into 2010 according to Wall Street’s most influential bank. Analysts at Goldman Sachs
Europe and America have released their full year
2010 estimates and they are very bullish about the upcoming year.
Goldman sees very low rates, stronger than expected earnings, strong commodity demand and investor reallocation driving prices higher. Goldman sees no rate changes through 2011 – one of the most accommodative outlooks of any bank we have covered. Stronger than expected revenue growth and continued margin expansion will result in 15%+ equity returns in the upcoming year. Although they see a continuation in the rally some moderation is expected. As we previously mentioned, their analysts expect many similarities to 2004. David Kostin wrote:
“Continued profit margin resiliency from prior aggressive cost reductions should drive strong returns in early 2010 and push the S&P 500
Their analysts in Europe are even more bullish. They see the DJ STOXX 600 rising 20% to 300 by the end of 2010.
Goldman argues that we are transitioning into the growth phase of the recovery from the hope phase. This period is generally characterized by stabilization in economic growth and lower equity returns than the hope phase. Nonetheless, doubt remains and catalysts for higher stock prices remain.
Perhaps most important, Goldman sees a continued influx of cash to the equity markets. Thus far, investors have been risk averse and either remain in cash or have moved into bonds. Goldman sees a substantial move into equities as investors become less risk averse.
How to play it? Thematically they focus on three key themes:
- Dispersion – higher growth and higher sustainable returns companies.
- BRICs exposure.
- High and growing dividend growth companies
