"The title says it all: US Portfolio Strategy 2012 Outlook Strategies for Stagnation,
From Goldman's David Kostin
Index: Our year-end 2012 S&P 500 target equals 1250
Risks: Policy, economy, and margins
Index: Our year-end 2012 S&P 500 target equals 1250
- Economy: Stagnant US economy growing by 1.5% in 2012 and 2.2% in 2013; low inflation; low interest rates.
- Earnings: We forecast operating EPS of $100 in 2012 and $106 in 2013 (bottom-up consensus is $108 and $119).
- Valuation: Historical precedent suggests stable P/E ratio of 11.8x in 2012. DDM supports our 12-month target of 1250.
- Money flow: We forecast $500 billion of net inflow into US equities in 2012. Buybacks will offset retail outflow.
Risks: Policy, economy, and margins
- Policy: In Europe, sovereign debt crisis. In US, election and budget negotiations. In Asia, policy responses to inflation.
- Economy: US data remains lackluster. We forecast 9.0% jobless rate for year-end 2012.
- Margins: We forecast net margins will peak in 2011 and begin to decline in 2012. Consensus expects margins to rise..."
