A month ago, when Goldman cut its US GDP outlook for Q1 (to be followed by downgrades to both H2 and Q2) many traders said: "Some other things nobody will be able to predict: Hatzius dropping full year US GDP from 4% to 2.25%; Goldman's downgrade of precious metals, Kostin's 2011 S&P 500 price target reduction by 20%, and Goldman getting its New York Fed branch to commence monetizing $1.5 trillion in debt some time in October." One by one all of the predictions are starting to come true.
Last night in US, Goldman head market strategist just officially released the latest update on US outlook which will also impact in many respect of the rest of the world. Unofficially, some of the release have also been hinted to the public by Goldman executives in a few occasion. We had also provide a bit clue in the first quarter of this year on the highlighted sector switching for trading and investment. Following are some key notes from the 30-pages update report which may be worth noting for guidance in the remainder of 2011/12. Goldman Sachs: * * *We have lowered our S&P 500 2012 EPS forecast to $104 from $106 and our year-end 2011 price target to 1450 from 1500* **At the sector level, the largest changes in our earnings estimates are a $2 *increase in Energy* 2012 EPS and a $2 *decrease in Financials* earnings and a *smaller negative revision to Consumer Discretionary*. We made further minor changes to other sectors that are not large enough to highlight. [image: GS S&P500 Forecast 2011.png] *We expect S&P margins to contract in 2012, focus on sales growth.* **The combination of higher commodity prices, lower global GDP growth and rising inflation raises our sales forecasts but lowers S&P 500 expected margins in aggregate. *We focus on sectors and stocks best positioned to grow earnings through higher sales*. * * *Our new 3-, 6-, and 12-month price targets: 1400, 1450 and 1500.* **We forecast S&P 500 will grow sales by 10% in 2011 and 8% in 2012, similar to consensus. But we expect margins will peak at 8.9% this year and slip to 8.8% in 2012. Consensus forecasts margins rise to 9.6% in 2012. *Our commodities strategists forecast 20%+ gains.* **We expect a slow but sustained GDP growth environment that will tighten key supply constrained markets and drive prices higher in 2012. Persistent impact of MENA (Middle East and North Africa) events will push Brent crude to $140/barrel by end-2012. *Stocks with fast sales growth should perform even if margins fade.* Firms forecast to generate high sales growth in 2012 are better positioned to absorb rising commodity prices and still post strong EPS gains than companies with average or lackluster sales prospects. '+'
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