Two Thursdays ago, Goldman Sachs came out with their 2011 US Equity Forecast titled “Easy Money, Hard Market”. But they aren’t forecasting too hard of a market given that they are targetting 1450 on the S&P by year end.
CNBC did excellent coverage of the Goldman report, including an 8-minute interview with David Kostin, Goldman’s Chief US Investment Strategist. Kostin is an excellent analyst in my opinion and I listened to what he had to say with great interest.
I was disgusted with how rude Mark Haines was to him but that is typical. Squawk On The Street (9am-10am EST) is essentially unwatchable to me due to Haines bitter personality and hostility to the guests. I feel sorry for Erin Burnett who has to co-host with him.
Kostin said three things underscore the bullish forecast: a good economy (accelerating growth, low inflation and low interest rates), good earnings (12% growth and $94 and $104 in S&P earnings in ’10 and ’11) and good valuations (12.9 times versus fair value of 13.9 times).
As a result, Goldman is recommending long cyclicals (tech, energy, financials) and avoiding staples (healthcare, consumer staples, utilities).
They are also targetting $1690 for gold and 3.3% for the 10 year treasury.
One of their Top Trades for 2011 is long financials. This has been getting a lot of attention on Wall Street and probably played a role in financials outperformance last week.