It’s difficult to find an analyst on Wall Street who isn’t very bullish right and the analysts at Goldman Sachs are no exception. David Kostin, Goldman’s Chief Equity Strategist, says the S&P 500 could hit 1,300 by the middle of this year. They say mutual funds and hedge funds will be forced to chase the indices as they’ve lagged thus far:
“Core mutual funds returned 5% reflecting underweight positions in Consumer Discretionary which surged 14% in two months, twice the market rebound. We expect the S&P 500 to rise to 1300 by mid-year (+10%), before ending 2010 at 1250 (+5%).”
They also believe the earnings picture is relatively healthy and expect $76 S&P EPS for 2010 and $90 for 2011. This makes equities modestly priced and still very attractive:
“Our top-down EPS forecasts of $76 and $90 for 2010 and 2011 reflect +33% and +20% growth, respectively. Top-down the S&P 500 trades at an NTM P/E of 15.7X (14.7X on pre-provision EPS). Bottom-up, it trades at an NTM P/E of 15.1X and LTM P/B of 2.5X.”
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.