Goldman's Gloom
Why does the market sit quietly beneath resistance at S&P 2020, as if it's merely waiting to go higher? Because Goldman Sachs just got gloomier on US equities -- even more so than their call from only 2 weeks ago when they lowered earnings estimates, including dropping 2016 projections to $120 EPS.
Yesterday, the GS economics team led by David Kostin gave us this soundbite which levels lots of bullish ideas in 21 words...
We expect a combination of disappointing sales growth and weak margins coupled with negative fourth-quarter guidance and reduced prospects for 2016.
They also highlighted their concern about Washington politics, noting that "Negotiations to lift the debt ceiling may be contentious and may not be resolved until the last moment." Sounds like politics as usual. In any event, the market doesn't seem too worried about Congress, or Goldman's views.
But the one thing that stands out to me is the peak in profit margins. This event is highly correlated with economic recessions. While the latter seems remote right now, it will be something to track more closely if this earnings season is as bad as, or worse than, expected.
With this in mind, I want to give you a final "advance notice" of the new portfolio that "Steve" is opening tomorrow morning, Wednesday, October 14. It aims to conquer volatility by riding true Game Changers -- the Apples, Googles, and Teslas of tomorrow. ..........
