Goldman sees great year for equities, decent one for Treasuries

Goldman sees great year for equities, decent one for Treasuries
Firm predicts S&P 500 will top 1,500 in December; yields on ten-year notes to touch 3.75 percent
JAN 24, 2011
By  John Goff
Goldman Sachs Group Inc., Wall Street's most profitable investment bank, predicts the Standard & Poor's 500 Index will rally 18 percent to 1,500 by the end of December and Treasuries will have a “decent” year. “We have a very out-of-consensus view for how much the economy can grow before this growth generates higher inflation and interest rates,” Jan Hatzius, the company's New York-based chief U.S. economist, wrote in a report he distributed by e-mail today. “If we're right, the likely implication is a decent environment for the Treasury bond market and a very good environment for the equity market.” The S&P 500 has climbed 12 percent over the past year, rising to the highest level since Lehman Brothers Holdings Inc.'s bankruptcy in September 2008 as Fed Chairman Ben S. Bernanke pumps $600 billion into the economy and President Barack Obama extends tax cuts. An advance to 1,500 would result in a 19 percent gain for the year. The index has only risen that much twice in the past decade, gaining 23 percent in 2009 and 26 percent in 2003. U.S. three-month bill rates will average 0.2 percent in 2011 and 0.3 percent in 2012, the report said, compared with 0.14 percent today. Ten-year Treasury yields will rise to 3.75 percent by Dec. 31 from 3.35 percent now, according to Goldman, which is one of the 18 primary dealers that are authorized to trade directly with the Federal Reserve. Quicker Growth The world's biggest economy will expand 3.4 percent this year, the report said, quickening from 2.6 percent in the third quarter of 2010, which are the most recent figures available. The U.S. consumer price index will increase 1.7 percent, Goldman predicts, versus 1.1 percent that the government reported for November from a year earlier. Low inflation helps preserve the value of a bond's fixed payments. Ten-year real rates, what investors get after accounting for costs in the economy, have doubled over the past year to 2.24 percent. Today's report reiterated forecasts for the S&P 500 and 10- year yields that Goldman Sachs issued at the end of 2010 and earlier this year. --Bloomberg News--

Latest News

The 2025 InvestmentNews Awards Excellence Awardees revealed
The 2025 InvestmentNews Awards Excellence Awardees revealed

From outstanding individuals to innovative organizations, find out who made the final shortlist for top honors at the IN awards, now in its second year.

Top RIA Cresset warns of 'inevitable' recession amid tariff uncertainty
Top RIA Cresset warns of 'inevitable' recession amid tariff uncertainty

Cresset's Susie Cranston is expecting an economic recession, but says her $65 billion RIA sees "great opportunity" to keep investing in a down market.

Edward Jones joins the crowd to sell more alternative investments
Edward Jones joins the crowd to sell more alternative investments

“There’s a big pull to alternative investments right now because of volatility of the stock market,” Kevin Gannon, CEO of Robert A. Stanger & Co., said.

Record RIA M&A activity marks strong start to 2025
Record RIA M&A activity marks strong start to 2025

Sellers shift focus: It's not about succession anymore.

IB+ Data Hub offers strategic edge for U.S. wealth advisors and RIAs advising business clients
IB+ Data Hub offers strategic edge for U.S. wealth advisors and RIAs advising business clients

Platform being adopted by independent-minded advisors who see insurance as a core pillar of their business.

SPONSORED Compliance in real time: Technology's expanding role in RIA oversight

RIAs face rising regulatory pressure in 2025. Forward-looking firms are responding with embedded technology, not more paperwork.

SPONSORED Advisory firms confront crossroads amid historic wealth transfer

As inheritances are set to reshape client portfolios and next-gen heirs demand digital-first experiences, firms are retooling their wealth tech stacks and succession models in real time.