Report
November 28, 2012
2013 US Equity Outlook: Selectively seeking growth
Portfolio Strategy Research
Look past near-term political risk to improving growth prospects
US economy will gain strength as 2013 progresses
The turbulent political environment that curtailed corporate risk-taking in 2012 will end. Full ‘fiscal cliff’ will be averted but taxes will rise and federal spending will be cut. Economy will grow by 1.9% in 2013 and 2.9% in 2014.
David J. Kostin
(212) 902-6781 david.kostin@gs.com Goldman, Sachs & Co.
Stuart Kaiser, CFA
Corporate fundamentals support continued profit cycle expansion
We forecast S&P 500 revenues rise by more than 4% in 2013 and 2014, margins hover at current levels (8.8%-9.0%), earnings climb by more than 6% and the P/E multiple expands modestly from 13.2x to 13.8x at end 2013.
(212) 357-6308 stuart.kaiser@gs.com Goldman, Sachs & Co.
Amanda Sneider, CFA
(212) 357-9860 amanda.sneider@gs.com Goldman, Sachs & Co.
Valuation: 12-month target of 1575 reflects 12% potential return
Our 3-month, 6-month, and 12-month forecasts are 1450, 1500, and 1575. We use six valuation approaches including DDM, uncertainty-based P/E multiple, cyclically-adjusted P/E multiple, price/book and ROE relationship.
Krag Gregory, Ph.D.
(212) 357-3770 krag.gregory@gs.com Goldman, Sachs & Co.
Strategies to capture growth: market, sectors, stocks
(1) Stocks will outperform Treasuries; (2) Equities will beat credit returns, although not on a risk-adjusted basis; (3) Cyclical sectors will beat defensive sectors (Materials, Industrials, Information Technology will outperform Consumer Staples, Telecom, and Health Care); (4) Double Sharpe Ratio stocks offer both high risk-adjusted earnings growth and prospective returns (Bloomberg ticker: ); and (6) Stocks with high BRICs sales exposure will beat domestic-facing firms (). Our 2013 S&P 500 total return forecast exceeds other US asset classes
16 14 12 10 8 6 4 2 0 (2) 14.2% Goldman Sachs 2013
2013 US Equity Outlook: Selectively seeking growth
Portfolio Strategy Research
Look past near-term political risk to improving growth prospects
US economy will gain strength as 2013 progresses
The turbulent political environment that curtailed corporate risk-taking in 2012 will end. Full ‘fiscal cliff’ will be averted but taxes will rise and federal spending will be cut. Economy will grow by 1.9% in 2013 and 2.9% in 2014.
David J. Kostin
(212) 902-6781 david.kostin@gs.com Goldman, Sachs & Co.
Stuart Kaiser, CFA
Corporate fundamentals support continued profit cycle expansion
We forecast S&P 500 revenues rise by more than 4% in 2013 and 2014, margins hover at current levels (8.8%-9.0%), earnings climb by more than 6% and the P/E multiple expands modestly from 13.2x to 13.8x at end 2013.
(212) 357-6308 stuart.kaiser@gs.com Goldman, Sachs & Co.
Amanda Sneider, CFA
(212) 357-9860 amanda.sneider@gs.com Goldman, Sachs & Co.
Valuation: 12-month target of 1575 reflects 12% potential return
Our 3-month, 6-month, and 12-month forecasts are 1450, 1500, and 1575. We use six valuation approaches including DDM, uncertainty-based P/E multiple, cyclically-adjusted P/E multiple, price/book and ROE relationship.
Krag Gregory, Ph.D.
(212) 357-3770 krag.gregory@gs.com Goldman, Sachs & Co.
Strategies to capture growth: market, sectors, stocks
(1) Stocks will outperform Treasuries; (2) Equities will beat credit returns, although not on a risk-adjusted basis; (3) Cyclical sectors will beat defensive sectors (Materials, Industrials, Information Technology will outperform Consumer Staples, Telecom, and Health Care); (4) Double Sharpe Ratio stocks offer both high risk-adjusted earnings growth and prospective returns (Bloomberg ticker: ); and (6) Stocks with high BRICs sales exposure will beat domestic-facing firms (). Our 2013 S&P 500 total return forecast exceeds other US asset classes
16 14 12 10 8 6 4 2 0 (2) 14.2% Goldman Sachs 2013