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.