Goldman’s comparatively upbeat evaluation got here in opposition to a backdrop of a market buffeted by inner and exterior dangers — most notably the U.S.’ ongoing commerce warfare with China. The Dow has erased its beneficial properties for the yr, whereas the S&P 500 pulled again 2.three p.c to 2,633.08 and turned damaging for the yr.
The financial institution acknowledged that these sharp losses will translate into “some near-term restraint on spending,” in addition to client lending. Rising rates of interest can even dampen the outlook, the financial institution stated, including that progress will step by step decelerate from 2.eight p.c within the first quarter to a median of two.Four-to 2.5 p.c over 2019.
In a somber evaluation of its personal on Friday, Morgan Stanley forecast the market would stay “vary sure” in 2019, citing “the elevated threat of an earnings recession. We count on topline progress to decelerate (resulting from decelerating GDP) and margins to come back underneath strain.”
With the Federal Reserve and the European Central Financial institution pulling again on free cash insurance policies, “the excellent news is that tightening could also be coming to a pause/finish early subsequent yr which may deliver reduction to international asset costs notably if China progress stabilizes,” Morgan Stanley’s analysts wrote.
Nonetheless, economists level to the sharp drop in crude costs, which lately fell beneath $50 per barrel, as a lift for customers.
“The latest declines within the oil value, the excessive financial savings charge, and powerful client sentiment, largely offset the drag from latest inventory value declines, tightening lending requirements, and better charges,” in response to Goldman.
“The underside line is that even after latest declines within the fairness market, we proceed to count on sturdy however decelerating consumption progress over the following few quarters,” the financial institution stated.