Where will the stock market end the year? In the same place it is right now, according to one expert. An equity market expert from Goldman Sachs commented to Bloomberg. David Kostin looked at the economy, earnings, and his forecast for gross domestic product. That GDP prediction was for only 3% growth this year. Other economists have been more optimistic because of a low jobless rate and robust company earnings.
Kostin’s view of corporate earnings is dim because he does not see improvement across all sectors. “The probability of a multiple expansion, while possible, is less probable,” he told the news service.
Kostin is not alone. Several experts believe inflation is too hot for the Federal Reserve to reduce interest rates. That means mortgages and car loans will be unaffordable for some people, and companies may struggle to raise new capital. Oil prices may increase because of tensions in Ukraine and the Middle East.
Earnings are another matter. Much of the increase or decrease in the major stock indices is based on the performance of a few companies, most of which are in the tech sector. It may be difficult for the stock market to advance if a few of these stocks stumble.
Finally, there are the stock markets themselves. They have advanced little since mid-April. They dipped some toward the end of the month but have yet to stage a robust recovery.
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Author: Douglas A. McIntyre
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