zerohedge.com / by Tyler Durden / Feb 18, 2017 8:03 PM
Goldman Sachs really wants the market lower.
After several increasingly more comprehensive critiques of Trump’s fiscal policies (most recently this past weekend), on Friday, just as the S&P closed at fresh all time highs propelled by a late day ramp, Goldman’s chief equity strategist who has a 2,300 year end target on the index, cautioned that “cognitive dissonance exists in the US stock market” as “investors must reconcile S&P 500’s performance with negative EPS revisions from sell-side analysts.” Specifically, Kostin notes that the “S&P 500 has returned 10% since Election Day while consensus 2017E adjusted earnings have been lowered by 1%“, and predicts that “investors will soon de-rate their expectations of potential 2017 EPS growth as they face the reality that the accretive impact from tax reform will not occur until 2018.”
In short, “Financial market reconciliation lies ahead: We are approaching the point of maximum optimism and S&P 500 will give back recent gains as investors embrace the reality that tax reform is likely to provide a smaller, later tailwind to corporate earnings than originally expected.”
First, Goldman points out that the underlying current of optimism unleashed with the Trump election is no longer warranted:
Cognitive dissonance exists in the US stock market. S&P 500 is up 10% since the election despite negative EPS revisions from sell-side analysts (see Exhibit 1). Investors, S&P 500 management teams, and sell-side analysts do not agree on the most likely path forward. On the one hand, investors, corporate managers, and macroeconomic survey data suggest an increase in optimism about future economic growth. In contrast, sell-side analysts have cut consensus 2017E adjusted EPS forecasts by 1% since the election and “hard” macroeconomic data show only modest improvement.
The post Goldman: Investors Will Soon Realize They Were Too Optimistic appeared first on Silver For The People.