I think now that the big houses like Goldman Sachs are hedging and fudging and warning of a market plunge,
Goldman has said nothing of the sort, in fact quite the opposite, it is not necessary to make up lies about their recommendations.
GS Investment Strategy Group, Nov 20th:
'Thoughts on Continued Market Volatility
The return of downside volatility—especially over the last two days—has revived fears that the longest bull market in history has finally peaked. This concern is particularly acute now because stocks have thus far ignored the resumption of buybacks and a historically positive seasonality into year-end, factors that were expected to reverse the October weakness. Instead, the market has focused on a confluence of worries, including slowing global growth, less accommodative policy and rising geopolitical tensions.
While there are no certainties in investing, there are several reasons why we continue to believe that an underweight position in equities is premature:
? Slowing Growth ? Recession: While global growth has slowed since the start of the year, we should not equate that with the onset of recession. After all, most economies are still experiencing well above-trend growth. Arguably, the recent deceleration in activity lowers the risk of economic overheating and allows central banks to normalize policy gradually, elongating the business cycle.
? Continued Above-Trend US Growth: We expect this above-trend growth to persist next year, with our preliminary 2.3-3.0% real US GDP range standing well above potential growth estimates of 1.5-2.0%. Our forecast is supported by the fact that consumption spending—68% of GDP and the most persistent driver of growth—rose 4% in the third quarter. Moreover, the personal savings rate was recently revised higher to 6.4%, providing some dry powder for future spending. Even so, growth is likely to be a bit slower in 2019 as the drag from tighter financial conditions—namely higher interest rates, a stronger dollar and lower equity prices—is only partially offset by the remaining boost from tax reform and government spending. The net effects should represent a modest ~0.4 percentage point drag on quarterly GDP growth next year.
? Still Low Risk of Recession: While financial conditions have tightened, we continue to assign 10% odds to a recession over the next year, given the positive trend of economic indicators, still positively sloped yield curves and low levels of inflation, which should enable the Federal Reserve to continue its gradual pace of tightening. We expect one more rate hike this year and two to three next year.
? Defaults are Likely to Remain Contained: Recent spread widening in high yield—particularly in response to falling oil prices—has rekindled fears that we are on the verge of a turn in the credit cycle. Yet we note that the economy is the most important driver of defaults and growth remains above trend. In turn, the par-weighted US high-yield default rate was unchanged for a third consecutive month in October at just 2%, well below the historical rate. While the energy sector is still about 15% of the high yield universe, the firms that survived the 2015–16 default cycle have since restructured their business models to be viable at $45-55 oil prices compared to needing $100 oil back then.
? Odds Favor Remaining Invested in Expansions: Investors enjoy high odds of a positive return and low risk of large losses when the economy is expanding, as it is now. Equity returns have also remained favorable until about six months prior to a recession, highlighting the penalty for prematurely exiting the market. Keep in mind that growth scares—such as the one we are currently experiencing—occur far more frequently than actual recessions and equities have tended to rally when growth proved better than feared.
? Earnings Remain Supportive: Earnings expanded by nearly 26% in Q3, 6.7% higher than expectations and more than twice the level of sales growth, indicating expanding margins. Tax cuts are not the sole driver either, as earnings before interest and taxes (EBIT) grew 13% in Q3. While such strong performance has fostered concern about peak earnings growth, we note that about 3/4ths of market peaks occurred more than two years following the peak in earnings growth. Moreover, these earnings are fueling record stock buybacks, which are estimated to exceed $900B this year.
? Risks Unlikely to Topple US Expansion: Although there is no shortage of global risks, we do not think any of them—in isolation or collectively—is likely disruptive enough to tip the US economy into recession. US trade tensions remain elevated with China but have abated with many other key trading partners; these tensions have not derailed business sentiment which remains at expansionary levels. And while a divided government has resulted from the recently concluded mid-term elections, stocks have typically gained in the subsequent year regardless of who wins as uncertainty dissipates."
GS has a record of not only not panic selling during market bottoms, but of being the buyer from other Wall St shops, historically speaking. LTCM circa 1998 would be one well-known example.