Why Goldman Sachs Cut Its S&P Forecast Today


Among the notable calls today: Goldman cut its end-of-year forecast on the S&P 500 from 1500 to 1450.

In a note, Goldman’s David Kostin wrote:

We expect S&P margins to contract in 2012, focus on sales growth  

The combination of higher commodity prices, lower global GDP growth and rising inflation raises our sales  forecasts but lowers S&P 500 expected margins in aggregate. We focus on sectors and stocks best positioned to grow earnings through higher sales. We expect Energy, Consumer Staples and Info Tech to post the highest revenue growth in 2012. 

Raise Consumer Staples, lower Consumer Discretionary  
Consumer Staples should generate superior sales and earnings growth vs. Consumer Discretionary as input cost inflation begins to decline in 2H11 and pricing starts to catch up. A transition to late expansion favours Staples outperformance and Discretionary is more impacted by higher oil prices.