Global equity bear market not over yet – Goldman Sachs

A screen displays the trading information for Goldman Sachs on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., Oct 17, 2022. REUTERS/Brendan McDermid

Goldman Sachs on Monday warned that the global equity bear market is not over as the markets are yet to see a trough in the momentum of global growth deterioration, a peak in interest rates and valuations lowered to reflect a likely recession.

The Wall Street investment bank expects returns to be a “relatively low” 6 percent through the end of 2023 as investors focus on the pace of monetary policy tightening and the consequent hit to growth and earnings.

“We continue to think that the near-term path for equity markets is likely to be volatile and down before reaching a final trough in 2023,” Goldman Sachs said in a note.

It expects the S&P 500 index to be around the 4,000-points level towards the end of 2023, implying an increase of less than 1 percent from current levels, as it sees no earning growth.

Goldman expects earnings for the constituents in the Pan-European STOXX 600 index to slide 8 percent next year, while forecasting a 3-percent earnings growth for companies in Japan’s TOPIX and MSCI’s Asia-Pacific ex-Japan indexes.

The investment bank expects investors to start to price in expectations for a bull market next year.

“We expect markets to transition into a ‘Hope’ phase of the next bull market at some point in 2023, but from a lower level.”