Investors have every right to fret about U.S. equities, especially with the Dow Jones Industrial Average down 6.7% thus far in October as of Friday, while the S&P 500 and Nasdaq Composite are both down 8.8% and 10.9, respectively. Nonetheless, Goldman Sachs’ chief U.S. equity strategist David Kostin is expecting the market pain to be temporary with a 6% rebound coming before the end of 2018.
“The recent sell-off has priced too sharp of a near-term growth slowdown,” said Kostin. “We expect continued economic and earnings growth will support a rebound in the S&P 500.”
Amid third-quarter earnings reports last week, the Dow experienced four out of five losing sessions last week as technology stocks continued to sell off, signaling a sign that the decade-long bull run could finally be coming to a close. The S&P 500 followed the Nasdaq into a market correction phase, dropping 3.9% to almost match the Nasdaq’s 3.8% drop in what’s been a volatile October for U.S. equities.
Kostin’s words should certainly induce a calming effect for U.S. equity investors, especially when CNN’s Fear & Greed Index is tilted sharply to the left into “extreme fear” territory.
Other market analysts’ assessment are in accordance with Goldman Sachs as Chris Verrone, head of technical research at Strategas Research Partners, sees a floor in the latest sell-offs. According to Verrone, the major indexes have reached “within the ballpark of a tradeable low.”
Today’s rise in the Dow of over 200 points in the early session should also help ease investor fears. This week, earnings reports for the third quarter will continue with Apple being on of the heavy hitters that could help rally stocks further.
“Apple is scheduled to report quarterly earnings on Thursday and analysts who track the company predict— surprise —that the good times are likely to continue for Apple, the world’s most valuable public company,” said Jack Nicas of the New York Times. “Sales of iPhones have leveled off in recent quarters but people have been paying more for each device, sustaining a steady growth rate for the $1 trillion company.”
October has certainly made investors more aware of the market landscape, particularly in accordance with rising rates. At financial-planning and investment-management firm Inspired Financial in Huntington Beach, California, investors are contacting founder Evelyn Zohlen more often than usual, but they’re not in a state of panic.
“They’re pragmatic,” said Zohlen. “They’re asking if there’s anything unusual about this drop and whether they should be doing anything different.”
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