Any rebound in the S&P 500 Index is likely to prove temporary amid concerns about the U.S. economy, according to Goldman Sachs Group Inc. strategists.
Investor exposure declined last week as the benchmark briefly erased its 2025 gains, but it isn’t low enough yet to suggest “tactical upside as a result of of depressed positioning,” strategist David Kostin wrote in a note.
“An improvement in the U.S. economic growth outlook will be required to fully reverse the recent equity market weakness,” the strategist said, while reducing his full-year earnings growth estimate to 9% from 11%.
Kostin was among the bullish voices on U.S. stocks in 2024. For 2025, he says “equity returns will be more modest than last year and match the trajectory of earnings growth.”
U.S. stocks have faltered this year on worries about lofty valuations for the technology behemoths. Investors have also questioned if President Donald Trump’s America-First policies are likely to stoke inflation and lead to a slowing economy.
The S&P 500 is up only about 1% this year, while the MSCI All-Country World Index excluding the U.S. has rallied 5%.
Goldman’s managing director for global markets and tactical specialist, Scott Rubner, separately said he lacks conviction that demand for stocks is high enough to sustain a rebound.
Rubner turned bearish last month amid fading inflows from retail and other buyers. He notes the market is in the final stages of a clearing in positioning.
Morgan Stanley strategist Michael Wilson — a prominent bearish voice until mid-2024 — also said equities are likely to be more sensitive to economic growth than to a pullback in bond yields.
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