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GOLDMAN: 3 REASONS THE S&P 500 WILL DECLINE TO 1,250

David Kostin, Goldman’s Chief US Equity Strategy has been pretty bullish in recent years and despite some bumps in the road he’s been right.  But the strategist is singing a bit of a different tune these days.  He’s growing increasingly concerned about some negative trends that could send the S&P 500 below 1,250 (via Business Insider):

“Kostin said there were three main reasons for his call:

  1. The U.S. economy is stagnating, growing below trend.
  2. In a weak economic growth environment, markets historically have a flat multiple
  3. 2012 is expected to see earnings growth of only 3 percent.”

The risk is likely skewed to the downside here as well. Since profits have been largely driven by the budget deficit in recent years and the risk of spending cuts looms we could very well see austerity lead to substantial profit declines.

See the full Kostin interview here:

Source: Bloomberg

 

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