The Fed’s Sunday rate cut did little to calm the panic or staunch the market bleeds as stocks fell more than 10% Monday.
"The coronavirus has created unprecedented financial and societal disruption," Goldman Sachs strategists wrote in a Sunday note. The investment bank expects no near-term end to the disruption.
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Here are four of Goldman Sachs’ predictions for the coronavirus market.
1. S&P 500 Bottom
The S&P 500 could strike a mid-year nadir at 2,000 — 41% below an all-time high struck in February, according to Goldman chief equity strategist David Kostin. He cut the firm’s S&P 500 EPS forecast twice in March to predict a 5% decline.
"Precision is difficult in a volatile market with daily price swings of +/-5% and a VIX level of 75," the firm wrote in a note.
2. S&P Revival
Goldman anticipates a year-end close at 3,200 — a 60% rise from the expected bottom but still 170 points below the index’s record high.
"The lesson of prior event-driven bear markets is that financial devastation ultimately allows a new bull market to be born," Goldman Sachs strategists wrote.
3. U.S. Economy Slows
Goldman’s economic research team predicted a “probable” recession with U.S. growth declining 5% in the second quarter. “This takes our 2020 GDP forecast down to +0.4%(from 1.2%). The uncertainty around all of these numbers is much greater than normal,” the team led by Jan Hatzius wrote.
The firm anticipates sharp contraction through March and April with an uncertain recovery thereafter.
4. Chinese Economy Slows
Goldman forecasts a 9% year-over-year drop in China’s economy in the first quarter rather than the previously predicted 2.5% expansion. Economists anticipate 2020 with real GDP to grow just 3% instead of the anticipated 5.5%.
“While more forceful policy support could present upside risk, the recovery could be further delayed if the pandemic is not brought under control globally over the next few months,” economists Hui Shan, Andrew Tilton and Yu Song wrote in a Tuesday note.
They expect economic recovery to be constrained by global weakness.