Goldman Throws in The Towel: Slashes S&P Price Target to 3,600… Warns of Recession Crash To 3,150
The comments below are an edited and abridged synopsis of an article by Tyler Durden
Less than a week after Goldman slashed its 2022 GDP forecast to 0% growth, hinting that a recession was on deck, its chief equity strategist David Kostin said that while he had a 4,300 year-end price target on the S&P500, he saw the index tumbling as low as 2,900 in a recession. The belief was that Goldman would slash its optimistic 4,300 price target to 3,000, and overnight Goldman did just that. Kostin, who has been wrong about almost everything over the past year, just slashed his year-end S&P500 target from 4,300 to a 3,600, 20% lower and below the market’s current price.
The bottom line is that it’s the fault of surging interest rates and real yields: “The expected path of interest rates is now higher than we previously assumed, which tilts the distribution of equity market outcomes below our prior forecast.” Here, Kostin pretends he was right all along, saying that “the S&P500 Index actually reached our previous year-end target of 4,300 in mid-August,” even though Kostin never told clients to sell there.
Since the rate complex has shifted dramatically, Kostin now says that “the higher interest rate scenario that we now incorporate into our valuation model supports a P/E of 15x (vs. prior forecast of 18x) and implies a year-end (3-month) S&P500 target of 3600 (-5%) and 6-month and 12-month forecasts of 3600 (-5%) and 4000 (+6%).”
One of Kostin’s colleagues, Dominic Wilson, has an S&P500 target of as low as 2,900 in a global recession scenario, but Goldman will wait the requisite two months until after the midterms before it tells the truth about what lies ahead.
While Goldman has flip-flopped from one of the most bullish to one of most bearish banks on Wall Street, many knew long ago that this bearish pivot was coming. Now that even Goldman has turned, the bottom may finally be in sight, because if Goldman’s case is to tell all its clients to sell, then the bank’s traders are officially buying everything thrown their way.