Goldman came out with its 2013 equity outlook this week, and it’s very bullish.
The call made by David Kostin is for the S&P to gain 12% from here, anding 2013 at 1575. If you add in dividends, the gain is 14%.
So if you just buy the S&P 500, you should do pretty fantastic next year.
Why is Kostin so bullish?
The firm sees 2013 growth GDP growth of about 2%, S&P revenue growth of 4.4%, margins staying flat where they are, and S&P earnings of $107 (up from $100). After we get past the fiscal cliff, S&P multiples will expand modestly by about 5%.
So how can you do even better than the 12%?
Kostin suggests a few different avenues.
- Bet on cyclicals (like materials and tech) over defensives (like healthcare and consumer staples).
- Stocks that have experienced both high-risk adjusted EPS growth and risk-adjusted actual growth.
- Bet on BRICs exposure over domestic exposure.
This last point is particularly interesting. One of the big themes of 2012 has been the outperformance of US exposure vs. foreign exposure.
Now Goldman sees this reversing. Growth is expected to bounce back, and Goldman is above consensus in its BRICs growth estimates.
And Goldman isn’t alone.
In BofA/ML’s equity outlook, it also sees a return to over-performance among companies with foreign exposure.
Bottom line from Goldman: Buy stocks, buy BRICs, and cyclicals.
This is a very bullish outlook.