Bull market limping toward its deathbed: Goldman Sachs

Fear not, a 'new bull market will likely be born later this year'

The longest bull market in history is running out of steam, according to Goldman Sachs.

A crash in oil prices and lower interest rates will result in diminished energy and financial company profits, pinching the S&P 500, according to the New York-based investment bank, which lowered its 2020 earnings-per-share forecast to $157 for the benchmark index, a 5 percent drop from last year.

“After 11 years, 13% annualized earnings growth and 16% annualized trough-to-peak appreciation, we believe the S&P 500 bull market will soon end,” wrote David Kostin, chief U.S. equity strategist at Goldman Sachs.


The S&P 500 has plunged by as much as 19.2 percent from its Feb. 19 peak, coming within 0.8 percentage points of bear-market territory. A bear market, which would begin with an S&P 500 close below 2708.92, is defined by a 20 percent drop from a market peak, and would signal the end of the bull market that began on March 9, 2009.

“Investors have cut their equity positions in recent weeks, but not to levels reached at the trough of other major corrections this cycle,” Kostin wrote.

He believes “both the real economy and the financial economy are exhibiting acute signs of economic stress.”

A fast-spreading COVID-19 outbreak has disrupted supply chains, eroded demand, curbed travel and prompted employee furloughs, all resulting in a hit to corporate earnings.

Adding to that mix a likely drop in capital spending by energy companies, hamstrung by low oil prices, creates a toxic combination.

Kostin thinks the S&P 500 will trade as low as 2,450 by midyear, but that a “new bull market will likely be born later this year” as the benchmark index soars 31 percent to 3,200 by yearend.

Meanwhile, Jonathan Golub, chief U.S. equity strategist at Credit Suisse, the Zurich-based investment bank, earlier this week lowered his S&P 500 earnings-per-share estimate from $173 to $165, or earnings growth of just 0.2 percent.


“We believe the path of quarterly will be more important than the full-year numbers,” Golub wrote. “Given the timing of the outbreak in the U.S., first-quarter profits should weaken but remain positive. By contrast, earnings-per-share growth should trough in the second quarter at -8%, and expand by +10% in the fourth quarter. Easy comps should result in above-trend earnings-per-share growth in the first half of 2021.”