Goldman Sachs Still Bullish, Despite Recent Plunge

Big hedge fund managers my be taking risk off the table, but Goldman Sachs remains bullish on the broader market and notes the recent pullback is totally consistent with a recovery. From the firm’s latest Kickstart report:
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Big hedge fund managers my be taking risk off the table, but Goldman Sachs remains bullish on the broader market and notes the recent pullback is totally consistent with a recovery. Goldman believes the S&P 500 will hit 1,300 by mi-year before pulling back to about 1,250 at the end of the year.

From the firm’s latest Kickstart report:

“Developments over the past two weeks have not altered our fundamental view. The market has plunged 12% in four weeks, but remains 60% higher than in March 2009. The pull-back has been consistent with sell-offs that occurred in recoveries following bottoms in 1974, 1982, 1987, 1990 and 2002. The correction has been orderly in that sector returns have been exactly in-line with beta-adjusted expected performance.”

“We expect the S&P 500 to rise to 1300 by mid-year (+21%), before ending 2010 at 1250 (+17%).”

"We recognize the dramatic decline in the Euro, and the potential impact it may have on reported US corporate earnings if it persists through year-end. We acknowledge the risk that European economic growth may be weaker than many currently expect as a result of pending fiscal tightening. However, we remind equity investors that US companies in the S&P 500 have total annual revenues of $8.4 trillion and Europe, Middle East and Africa combined explicitly account for just 10% of the total (and if charitably inclined, perhaps as much as 15% of the total if a generous allocation of sales to “Other” regions is allocated to Europe)."

Goldman is also out with its latest Hedge Fund Trend Monitor report, which tracks 629 hedge funds with $701 billion in long equity assets and $400 billion of short equity positions. The performance of hedge fund positions during the recent pullback has only solidified the firm's position on the market.

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