Goldman Sachs says the US equity market will likely ignite more rallies en route to recording fresh all-time highs.
In a video update, Brian Garrett, head of equity execution on Goldman Sachs’ Cross Asset Sales desk in Global Banking and Markets, says the S&P 500’s recovery from its March 30th lows has been remarkable.
But he notes that historical data suggests that May could see muted returns for the index.
“We think more record highs could be ahead for US equity markets. The S&P has had an extremely volatile start to the year, falling dramatically during the month of March and then regaining the highs by late April. After a fierce rebound, investors tend to ask if the rally can continue.
For instance, investor sentiment has gone from quite negative to extremely positive. So a natural question is, are there buyers still out there? And in fact, after the S&P makes new all-time highs, the next month’s returns tend to be below average. But we think there are still good reasons to be positive on US equities.”
But zooming out, Garrett says the market’s longer-term picture offers a reassuring backdrop for equity bulls.
“Stocks have rebounded for solid fundamental reasons. The geopolitical environment has cooled. The economy is healthy and earnings have surprised to the upside. While the returns are a bit weaker over the next month, they’re actually stronger than average over the next year.”
According to Garrett, those who ignore the day-to-day volatility and hold on to stocks with a longer-term horizon will likely get rewarded.
“Longer-term oriented investors should expect positive things from US equities.”
As of last week’s close, the S&P 500 is trading at a record high of 7,398.
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