The Omicron variant does not shake Goldman Sachs’ bullish stock market forecast for 2022

The fast-spreading Omicron variant does not (yet) shake confidence in Goldman Sachs’ call for double-digit percentage returns for the S&P 500 next year.

Goldman’s chief US equities strategist David Kostin on Monday reiterated an S&P 500 target of 5,100 by the end of 2022. The number marks a possible 12% rise in stock prices, measured from the current level of the S&P 500.

“We anticipate these gains will be primarily driven by 8% earnings per share growth combined with a stable P / E ratio. This pattern would coincide with the decomposition of returns typically seen at this point in the business cycle, and would be the pattern of this year where earnings drove the market to record highs while the index multiple actually shrank, “explained Kostin.

Of course, Kostin’s optimism about the market outlook is reflected elsewhere on Wall Street. Take, for example, the upward trend in ratings assigned to individual stocks by sell-side analysts.

According to FactSet, there are a total of 10,785 ratings for stocks in the S&P 500. Of these 10,785 ratings, 56.8% are buy ratings, 37.2% hold ratings and 6.0% are sell ratings. Energy, communications services, information technology, and healthcare have the most purchase reviews.

“It’s interesting to note that even with prices up 24% since late last year (December 31, 2020), analysts are more optimistic about S&P 500 stocks today than they were on the 31st. As of December 31 (2020), 53.7% of the ratings for S&P 500 stocks were buy ratings compared to 56.8% today. Nine sectors now have a higher percentage of buy ratings compared to December 31 (2020), led by the real estate industry (up to 54.). % from 47%) and materials (from 50% to 56%), “added John Butters, Senior Earnings Analyst at FactSet.

However, optimism for markets in 2022 could soon take a hit if current trading patterns persist.

The story goes on

The Dow Jones Industrial Average plummeted nearly 700 points on Monday as the highly contagious variant of Omicron continued to spread and disrupt global economic activity. The latest example: the World Economic Forum in Davos was postponed because Switzerland restricted mobility.

Big cap tech stocks like Meta, Google, and AMD were hit by growth fears again. The travel brands Delta Air Lines and JetBlue also came under pressure.

Kostin’s colleague Jan Hatzius has done his part in fueling some of these growth concerns.

Goldman’s chief economist slashed his GDP growth estimate for the first quarter of 2022 from 3% to 2%, mostly citing President Biden’s Build Back Better legislation that now looks dead in the water.

“The Omicron variant is likely to draw political attention back to virus-related issues and away from long-term reforms,” ​​said Hatzius.

Brian Sozzi is an editor and Anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and further LinkedIn.

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