Goldman Sachs senior strategist warns stocks could see ‘considerable’ pre-election downside that isn’t being factored into models

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Abby Joseph Cohen


  • Goldman Sachs’ Abby Joseph Cohen told Bloomberg on Thursday that markets could see “considerable downside” before the election due to factors that financial models aren’t picking up. 
  • These factors include the outcome of the election and what Congress and the president will do next before election day, Cohen said. 
  • The senior investment strategist added that the market is vulnerable to volatility and disappointment given the”wide gaps” in the relative valuation of stocks.

Goldman Sachs’ Abby Joseph Cohen told Bloomberg on Thursday that markets could soon see “considerable downside” based on factors that financial models cannot predict.

What Congress will do next, what the president will say, and how the election will end cannot be forecasted by modeling, the senior investment strategist said.

“Those of us who have lived our professional lives really focusing in on the math, I think should feel very humble right now,” Cohen said. “Because what we recognize is that the models may not be able to properly reflect all of the volatility not just in the markets, but in the economy, in policy, and of course in investor sentiment.”

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While Cohen said that it’s not unusual for volatility to rise before an election, there’s also been “erratic movement” with regard to fiscal policy. Stocks quickly sold off on Tuesday after Trump tweeted that negotiations for the next stimulus plan would be halted until the election. 

The famed strategist also said there are “wide gaps” in the relative valuation of stocks. Just a handful of stocks drove the market’s record rally following its March lows. Cohen said this can make the market more volatile, and

A Wall Street strategist says it’s time to exit tech stocks, and recommends 3 sectors that are cheaper and steadily improving

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Happy trader


 

  • Steven DeSanctis of Jefferies told CNBC on Tuesday that many large technology stocks are getting “pricey” and investors should look for alternatives in other sectors. 
  • “At nine times revenue, 10 times revenue, it gets a little pricey, and with that any bad news will actually be a huge detriment to these stocks,” the equity strategist said, referring to technology stocks. 
  • He recommends investors buy stocks in industrials, consumer discretionary, and materials sectors as alternatives to technology.

Steven DeSanctis, Jefferies equity strategist, told CNBC on Tuesday that many large technology stocks are getting “pricey” and there are cheaper alternatives that investors can buy now.

“At some point you have to say what is too high,” DeSanctis said, referring to tech stock valuations. “At nine times revenue, 10 times revenue, it gets a little pricey, and with that any bad news will actually be a huge detriment to these stocks.”

While he said he believes technology companies are fundamentally strong, sectors outside of technology are cheaper alternatives. 

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“Our argument is that things outside of tech are actually getting better,” the strategist said. 

DeSanctis told investors to look for stocks in industrials, consumer discretionary, and materials sectors. These are set to improve in revenue growth and will gain as the economic backdrop improves in 2021. They also may deliver better earnings growth than large-capitalization technology stocks, he said.

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Stock investors should capitalize on the recent market correction by broadening portfolios beyond just tech, says one top Wall Street strategist

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Trader crowd NYSE


  • Tech stocks’ time in the spotlight is over, and investors should begin shifts to value stocks and cyclical sectors, James Paulsen, chief investment strategist at The Leuthold Group, said in a recent note.
  • The S&P 500’s brief Thursday correction marks “an opportunity to ‘broaden your bets'” before valuations rebound, Paulsen said.
  • Money supply growth surged in recent months on the back of Federal Reserve easing and the CARES Act. That trend has preceded economic expansions by 12 months in all eight recessions since 1960, according to the strategist.
  • The cyclical sectors that avoided bankruptcy during coronavirus lockdowns “may currently be positioned with the greatest upside profit leverage,” Paulsen said.
  • Still, investors should hold on to some growth positions as their fundamentals remain healthy, he added.
  • Visit the Business Insider homepage for more stories.

The S&P 500’s brief correction opened the door for a shift to neglected corners of the market, James Paulsen, chief investment strategist at The Leuthold Group, said in a recent note.

The benchmark index fell enough Thursday morning to temporarily sit 10% lower from its early September record. The short-lived correction was made possible by tech-led declines staged over the month. After the high-flying mega-caps pulled major indexes out of their coronavirus-induced losses, investors balked at their lofty valuations and kicked off a wave of profit-taking.

Paulsen now expects cyclical sectors and value names to fuel the market’s next upswing. The lagging groups “seem poised to take a more significant leadership role in this bull market,” he wrote in a note to clients. The S&P 500’s most recent tumble “may represent an opportunity to ‘broaden your bets,'” he added.

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