Goldman Sachs (GS) likes U.S. stocks. Its equity strategists, led by David Kostin, think the S&P 500 will end 2014 at 1,900, good for a 6% gain. But it could be a bumpy ride, they say.
Reuters Kostin and team write:
Drawdown risk rising after 40% rally with no correction: S&P 500 has soared 26% YTD. The median expected drawdown equals 6% in the next three months and 11% during the next 12 months. Drawdowns of these magnitudes from the current level would equate to 1700 and 1600. We estimate a 67% probability of a 10% drawdown at some point in 2014…
We are not forecasting a decline in the index, but providing an estimate of the lowest point it may reach on its way to our future target.
Top 5 Growth Companies For 2014
Goldman Sachs, however, does see a pickup in capital spending, which is generally linked to an acceleration in economic growth and and an increase in sales, as companies only start to spend after they see a “ increased activity and demand.” That could benefit companies who aren’t spending much now but have strong returns on invested capital, including Marathon Oil (MRO), ConocoPhillips (COP), and Starbucks (SBUX).
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