Insider News: Goldman Sachs’ Top Equity And Credit Strategists Lay Out Their Approaches To Investing

Peter Oppenheimer spares no words: his business, Goldman Sachs, is cutting its predictions for corporate earnings and economic growth "virtually everywhere."

At a Monday media briefing, Goldman's chief global equities strategist and head of macro research in Europe said that the company is now forecasting profits growth of 5% for the S&P 500 and 2.9% for the US economy. This is below the firm's earlier forecasts of 8% profit growth and a 3.1% growth rate for the US economy.

The Russian invasion of Ukraine is the latest aspect contributing to 2022 being a more challenging year for markets than many analysts predicted. Commodity prices are soaring as supply networks are once again knocked off course, and inflation is at its highest level in 40 years.

Goldman's forecasts are not terrible – the GDP projection is broadly in line with the long-term trajectory of the economy. However, not long ago, analysts predicted an above-average year.

According to Oppenheimer, the reality for investors this year will be a market with a broad trading range and reduced stock returns. He said that the current economic cycle would be distinct from the last one, during which growth was rare and investors were ready to pay premium prices for companies that outperformed the general trend.

He anticipates a cycle fueled by excessive capital expenditure on decarbonization, the need for energy independence, and increased military expenditures in Europe. The cycle's greatest winners will be enterprises that experience high demand and can offer the financing that other businesses want.

"We believe that margin sustainability will become a much more critical factor for investors," he explained. "Lots of money will be required to scale up infrastructure in order to deploy these new energy sources, which expands the opportunity set for businesses that will provide that funding."

He is especially positive on commodities and commodity prices, saying that corporations in sectors such as oil drilling and mining have been hesitant to invest in previous years and will now be forced to do so.

"We've been fundamentally optimistic on commodities for some time now due to underinvestment in the commodity business after the collapse of demand due to the financial crisis," he said. "If we are entering a time of steadily increasing interest rates and growing inflation, we would expect real assets to take on a larger and more valuable position."

According to Oppenheimer, shares should beat bonds and cash throughout time, and his tilt to commodities comprises both shares in commodity producers and the commodities they create. Meanwhile, he says that increasing the monetary allotment made sense even before the conflict began. He maintains a neutral stance on credit and advises investors to underweight government bonds.