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Goldman Throws In The Towell: Slashes S&P Price Target To 3,600… Warns Of Recesion Crash To 3,150

Goldman Throws In The Towell: Slashes S&P Price Target To 3,600… Warns Of Recesion Crash To 3,150

Less then a week after Goldman slashed…

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Goldman Throws In The Towell: Slashes S&P Price Target To 3,600... Warns Of Recesion Crash To 3,150

Less then a week after Goldman slashed its 2022 GDP forecast to stagnation (i.e. 0% growth) hinting that a recession was on deck...

...and just two days after we reported that Goldman's chief equity strategist David Kostin launched a trial balloon, telling clients that even as he still has a 4300 year-end price target on the S&P500, he saw the broad index tumbling as low as 2,900 in a recession, when we commented that "and there is your bogey: within 2-3 months, right after the BLS discovers the "mistakes" it had been making in its labor model and rectifies them sending the US in a brutal recession, expect Goldman to slash its optimistic 4,300 price target to one at or below 3,000 as a recession now becomes the bank's base case scenario", overnight Goldman did just that, and while it has yet to cut to 3,000 - after all a recession is still not the bank's base case, but it will be in a few weeks - David Kostin, who has been dead wrong about pretty much everything over the past year (his initial 2022 year-end forecast was 5,100 set last November) just slashed his year-end S&P target from 4,300 to a whopping 3,600, which is not just almost 20% lower but is below the market's current price!

And while there is a lot of detail in the full pdf (available to pro subs in the usual place), detail which clearly wasn't relevant as recently as yesterday when stocks were plunging and Goldman still was forecasting a bounce to 4300, the bottom line according to Kostin is that it's all the surging interest rates' fault and more specifically, real yields, to wit: "the expected path of interest rates is now higher than we previously assumed, which tilts the distribution of equity market outcomes below our prior forecast." Here, laughably Kostin pretends he was actually right all along, saying that "the S&P 500 index actually reached our previous year-end target of 4300 in mid-August", even though rather sadly Kostin never told clients to sell there.

In any case, since the rate complex subsequently shifted dramatically, the Goldman strategist now says that "the higher interest rate scenario that we now incorporate into our valuation model supports a P/E of 15x (vs. prior forecast of 18x) and implies a year-end (3-month) S&P 500 target of 3600 (-5%) and 6-month and 12-month forecasts of 3600 (-5%) and 4000 (+6%)."

Some more details from the Goldman report:

Equity valuations have closely tracked real interest rates until recently. Real yields have soared from 0.4% to 1.3% during the past month and could reach 1.5% by year-end. For context, real yields were negative 1% at the start of the year when the S&P 500 index hit an all-time high of 4800 and traded at a P/E of 21x. The tightest yield gap between equities and rates since the pandemic further tilts the balance of risks to the downside.

Indicatively, this is a chart we have shown frequently in recent weeks, and here is the latest incarnation. Needless to say, it suggests much more pain in store:

Anyway, back to the Goldman report which looking ahead, says that "the outlook is unusually murky" and that most of the bank's clients expect a hard-landing:

The forward paths of inflation, economic growth, interest rates, earnings, and valuations are all in flux more than usual with a wider distribution of potential outcomes. Based on our client discussions, a majority of equity investors have adopted the view that a hard landing scenario is inevitable and their focus is on the timing, magnitude, and duration of a potential recession and investment strategies for that outlook.

Finally, and as we warned earlier this week, Goldman once again very strongly hints that in a recession scenario - which is now inevitable and just a matter of Goldman flipping a switch once it gets the green light from the corner office - the S&P would tumble as low as 3,150:

We previously published that in a recession falling S&P 500 EPS could cause the index to decline to 3150 (-17%). A 11% drop in EPS would be consistent with modestly negative real GDP growth and the 13% median EPS drop during prior recessions. Under a “hard landing” scenario, the yield gap would rise and the 3-, 6-, and 12-month S&P 500 targets would be 3400 (-10%) / 3150 (-17%) / 3750 (-1%).

Some more details on this "hard landing" scenario:

In a recession, we forecast earnings will fall and the yield gap will widen, pushing the index to a trough of 3150. Our economists assign a 35% probability of recession in the next 12 months and note that any recession would likely be mild given the lack of major financial imbalances in the economy. As we previously outlined, in the event of a moderate recession, our top-down model indicates EPS would fall by 11% to $200. However, prices move faster than analyst estimates, so we assume the market prices earnings of $220, halfway between consensus today and our recession earnings. Our 2024 EPS estimate assumes a 15% recovery in EPS to $230 which is similar to prior post-recession profit rebounds. From a valuation perspective, we assume real rates would fall to 0% as the Fed moves to cut rates and our yield gap model suggests a widening to 700 bp. The implied forward P/E multiple of the index would equal 14x.

For context, a 34% peak-to-trough decline in the S&P 500 index during a recession would only be slightly worse than the historical average of 30%. We see two risks that would create a more dramatic sell-off in equities during a recession. First, if inflation concerns were to limit the degree of monetary or fiscal policy support and interest rates did not fall, it could lead to even lower valuations or even larger economic and earnings growth declines than we model. Second, concentrated sector weakness, such as Information Technology in 2001 and Financials in 2008, could lead to an even sharper earnings and price decline.

Actually, Kostin may not know, but one of his global equity strategist colleagues, Dominic Wilson has an even lower S&P target of as low as 2,900 in a global recession scenario, one is now inevitable, but as we said before, Goldman will wait the requisite 2 months until after the midterms before it tells the truth about what is coming.

Here is the full breakdown of Goldman's soft and hard-landing scenarios...

... as well as the visual breakdown of how the S&P's "path" over the next year looks like according to Goldman:

One final point: looking ahead, Kostin finally fully agrees with Morgan Stanley's Michael Wilson - who long ago predicted the collapse in P/E multiples and has been focusing instead on the plunge in earnings - and writes that "in the near term, investor focus will soon turn from valuation to earnings. The surprisingly high August inflation reading was a pivotal event for macro investors regarding the path of Fed hikes. The analogue for stock investors is 3Q earnings season where record high profit margins will be under scrutiny."

Couple final observations: while it will come as news to many that Goldman has flip-flopped from one of the most bullish to one of most bearish banks on Wall Street, those who had been reading the notes and comments that we publish from the bank's Sales and Trading and flow desk, knew long ago that this bearish pivot was coming and none of this should come as a surprise. Perhaps more importantly, now that even Goldman has turned bull bear, the bottom may finally be in sight, because if Goldman's base case is to urge all, not just a handful of its best clients, to sell, then the bank's traders are officially buying everything that is thrown their way...

More in the full report available to pro subs.

Tyler Durden Fri, 09/23/2022 - 06:40

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Economics

Here’s Why Your Boss May Reject Your Business Travel Request

People are taking vacations again, but a once dominant travel sector is struggling to recover.

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People are taking vacations again, but a once dominant travel sector is struggling to recover.

Now that vaccines are readily available and President Joe Biden has declared that the pandemic is officially over, people are flying again. But they’re really not happy about it.

The research firm J.D. Power found that last year, when the airline industry first started to cautiously rebound, consumer satisfaction with airports reached an all-time high. But this was very likely both because of a relatively smaller sample size and that so many people were happy to fly again that they were willing to overlook a lot of what has become headache-inducing about modern airfare travel.

J.D. Power  (JD) - Get JD.com Inc. Report has found that this year, global passenger levels are nearly back up to 91% of pre-pandemic levels. 

Customer satisfaction has dropped sharply, 25 points on a 1,000-point scale, to 777, as more people have returned to airports, for reasons ranging from an increase in flight cancellations and delays to inflation-driven increases in the cost of airport food.

But while airlines are aware that customers aren’t happy, and that the Biden Administration might try to right the ship with proposals that airlines likely won’t care for, at least people are flying again.

But an additional survey by J.D. Power has revealed that while people are flying again, traveling for business (be it for in-person meetings or industry conferences), has been lagging behind and recovering at nearly the rate of traveling for pleasure. 

Is Traveling for Business on the Way Out?

J.D. Power’s research has found that many travelers doubt that travel levels will increase dramatically from where they are now, and that “a strong majority of executives believe their companies will spend less in the next six months compared to the same period in 2019, for instance, due to things like fewer trips overall or fewer employees sent when there is a trip scheduled,” according to their data.

Overall, business travel has returned to “about 81% of 2019 levels,” notes Managing Director Michael Taylor. “83% was our prediction for this quarter, we’ll see how well we did in a few weeks and add a predication for Q4.”

J.D. Power

Fears of recession and the rising costs of air tickets from inflation play a factor in the decline of business travel. But overall, the main reason is that many of us have gotten so used to working at home that two-thirds of employees would rather find a new job than go back to the pre-pandemic status quo. If employees feel they can get work done from home and don’t feel like braving traffic to return to the office, why would they feel they need to get on a plane?

So have services like Zoom (ZM) - Get Zoom Video Communications Inc. Report and Slack made the business trip redundant? Taylor has his doubts.

“But will people be meeting exclusively in the 'Metaverse' rather than in person? I do not think that will happen,” he says. “There is too much information to be gathered in face-to-face meetings, spoken and unspoken, to be replaced completely by virtual ‘reality.’”

Getty Images

So is This It for Business Travel?

Back in the heady pre-pandemic days three years ago, airlines could rely on the extra income from people whose jobs entailed a great deal of travel, and who had come to the realization that if they were going to spend a chunk of their lives on the road, they could splurge to make it a more comfortable experience. 

But if airlines want this sector to return, Taylor thinks it’s their duty to make it a more appealing option, because frequent delays and other headaches are enough to make anyone stick to Zoom.

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Airlines, Taylor says, must “create more of a “living room” experience for travelers, one that “makes travelers feel valued as patrons of the airlines, and makes people feel like individuals rather than cattle.”

Because while it’s hard to argue with the convenience, Taylor insists there is still something to be said for the occasional in-person meeting. 

“Millenia of evolution in mankind has created an awareness that can’t be described with words on a page or pixels on a screen,” he says. “People will still find advantages in meeting in-person rather than online.”

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BOEHRINGER INGELHEIM DONATES NEARLY 100,000 PET VACCINE DOSES TO HELP ELIMINATE RABIES AROUND THE WORLD WITH RELAUNCH OF SHOTS FOR GOOD(SM) INITIATIVE

BOEHRINGER INGELHEIM DONATES NEARLY 100,000 PET VACCINE DOSES TO HELP ELIMINATE RABIES AROUND THE WORLD WITH RELAUNCH OF SHOTS FOR GOOD(SM) INITIATIVE
PR Newswire
DULUTH, Ga., Sept. 28, 2022

In recognition of World Rabies Day on September 28, the d…

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BOEHRINGER INGELHEIM DONATES NEARLY 100,000 PET VACCINE DOSES TO HELP ELIMINATE RABIES AROUND THE WORLD WITH RELAUNCH OF SHOTS FOR GOOD(SM) INITIATIVE

PR Newswire

In recognition of World Rabies Day on September 28, the donation is for use on tribal lands and underserved communities in collaboration with Greater Good Charities

DULUTH, Ga., Sept. 28, 2022 /PRNewswire/ -- Boehringer Ingelheim, a global leader in veterinary rabies vaccines, has expanded its commitment to help prevent rabies in dogs by donating nearly 100,000 doses of rabies vaccine. The donation is part of the relaunched SHOTS FOR GOOD℠ program and will be used on tribal lands and in underserved communities across the United States.

Rabies is a zoonotic, viral disease, which can be transmitted through wild animals and pets. Once clinical symptoms appear, rabies is virtually 100% fatali. Even though it is vaccine-preventable, around 59,000 people still die from rabies every year globallyii. Rabies is present on all continents, except Antarctica, with over 95% of human deaths occurring in the Asia and Africa regionsiii. It can pose a significant risk anywhere if dogs are not vaccinated. Dogs are the main source of human rabies deaths, contributing up to 99% of all rabies transmissions to humansiv.

"Boehringer Ingelheim fervently believes no animal should suffer from a preventable disease," said Dr. Julie Ryan-Johnson, head veterinarian for shelters at Boehringer Ingelheim and board vice chair for Greater Good Charities. "Together with Greater Good Charities we can fight the presence of rabies on tribal lands and in underserved communities to keep pets healthier and happier for longer."

Boehringer Ingelheim Animal Health established the SHOTS FOR GOOD initiative in 2019 in Puerto Rico and underserved communities in California, Nevada, Oklahoma, Texas, North Carolina, Louisiana, Mississippi, and Florida. However, in 2020, the initiative was suspended due to global pandemic restrictions.

Since relaunching the program earlier this year, and in collaboration with the global nonprofit, Greater Good Charities, the program has enabled vaccination clinics throughout tribal lands in Alaska, Arizona, Colorado, Montana, and Utah. Additional vaccines have been utilized in Hawaii as part of Greater Good Charities' Good Fix program which offers high-quality, high-volume spay/neuter to help control pet overpopulation in underserved communities.

"In observance of World Rabies Day, we recognize the positive impact of vaccination events to raise awareness about rabies and how to prevent this deadly disease," said Denise Bash, vice president at Greater Good Charities. "The generous vaccine donations from Boehringer Ingelheim Animal Health and the Shots for Good initiative helps to protect pets while making this important effort possible."

About World Rabies Day

World Rabies Day, held every year on September 28, is observed by the United Nations as an International Day. Coordinated by the Global Alliance for Rabies Control, it is a day to raise awareness about rabies and how to prevent this deadly disease. Hundreds of events are held by organizations and individuals around the world in recognition of this day.

About Boehringer Ingelheim

Boehringer Ingelheim Animal Health is working on first-in-class innovation for the prediction, prevention, and treatment of diseases in animals. For veterinarians, pet owners, farmers, and governments in more than 150 countries, we offer a large and innovative portfolio of products and services to improve the health and well-being of companion animals and livestock. As a global leader in the animal health industry and as part of family-owned Boehringer Ingelheim, we take a long-term perspective. The lives of animals and humans are interconnected in deep and complex ways. We know that when animals are healthy, humans are healthier too. By using the synergies between our Animal Health and Human Pharma businesses and by delivering value through innovation, we enhance the health and well-being of both.

Learn more about Boehringer Ingelheim Animal Health USA Inc. at bi-animalhealth.com  

About Greater Good Charities

Greater Good Charities is a 501(c)(3) global nonprofit organization that works to help people, pets, and the planet by mobilizing in response to need and amplifying the good. Greater Good Charities, with a 100/100 rating on Charity Navigator, has provided more than $475 million in impact, including cash grants, in-kind supplies, and programmatic support, to charitable partners in 121 countries since 2007. To learn more about how Greater Good Charities amplifies the good across the globe, please visit greatergood.org.

Media Contact:
Chrissy Jones
Boehringer Ingelheim Animal Health
U.S. Communications
(516) 527-5456
christine.jones@boehringer-ingelheim.com 

REFERENCES

i World Health Organization: Rabies (who.int) (downloaded: April 1, 2022)
ii World Health Organization: Oral rabies vaccine: a new strategy in the fight against rabies deaths (who.int) (downloaded: April 1, 2022)
iii World Health Organization: Rabies (who.int) (downloaded: April 1, 2022)
iv World Health Organization: Rabies (who.int) (downloaded: April 1, 2022)

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SOURCE Boehringer Ingelheim

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Cambridge Bancorp Announces Receipt of Regulatory Approvals to Merge with Northmark Bank and Anticipated Closing Date

Cambridge Bancorp Announces Receipt of Regulatory Approvals to Merge with Northmark Bank and Anticipated Closing Date
PR Newswire
CAMBRIDGE, Mass., Sept. 28, 2022

CAMBRIDGE, Mass., Sept. 28, 2022 /PRNewswire/ — Cambridge Bancorp (NASDAQ: CATC), th…

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Cambridge Bancorp Announces Receipt of Regulatory Approvals to Merge with Northmark Bank and Anticipated Closing Date

PR Newswire

CAMBRIDGE, Mass., Sept. 28, 2022 /PRNewswire/ -- Cambridge Bancorp (NASDAQ: CATC), the parent company for Cambridge Trust Company ("Cambridge Trust"), today announced all regulatory approvals relating to the proposed merger between Cambridge Trust and Northmark Bank have been received. The shareholders of Northmark Bank approved the merger at a special meeting held on August 31, 2022.  The anticipated closing date of the merger is October 1, 2022, subject to the satisfaction of other closing conditions.

About Cambridge Bancorp

Cambridge Bancorp, the parent company of Cambridge Trust Company, is based in Cambridge, Massachusetts. Cambridge Trust Company is a 132-year-old Massachusetts chartered commercial bank with approximately $5.1 billion in assets at June 30, 2022, and a total of 19 Massachusetts and New Hampshire locations. Cambridge Trust Company is one of New England's leaders in private banking and wealth management with $4.0 billion in client assets under management and administration at June 30, 2022. The Wealth Management group maintains offices in Boston and Wellesley, Massachusetts and Concord, Manchester, and Portsmouth, New Hampshire.

Forward-looking Statements 

Certain statements herein may constitute "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements about the Company and its industry involve substantial risks and uncertainties. Statements other than statements of current or historical fact, including statements regarding the Company's future financial condition, results of operations, business plans, liquidity, cash flows, projected costs, the impact of any laws or regulations applicable to the Company, and measures being taken in response to the COVID-19 pandemic and the impact of the COVID-19 pandemic on the Company's business are forward-looking statements. Words such as "anticipates," "believes," "estimates," "expects," "forecasts," "intends," "plans," "projects," "may," "will," "should," and other similar expressions are intended to identify these forward-looking statements. Such statements are subject to factors that could cause actual results to differ materially from anticipated results. Such factors include, but are not limited to, the following: the businesses of Cambridge and Northmark may not be combined successfully, or such combination may take longer to accomplish than expected; the cost savings from the merger may not be fully realized or may take longer to realize than expected; operating costs, customer loss and business disruption following the merger, including adverse effects on relationships with employees, may be greater than expected; changes to interest rates; the ability to control costs and expenses; the current global economic uncertainty and economic conditions being less favorable than expected; disruptions to the credit and financial markets; changes in the Company's accounting policies or in accounting standards; weakness in the real estate market; legislative, regulatory, or accounting changes that adversely affect the Company's business and/or competitive position; the Dodd-Frank Act's consumer protection regulations; the duration and scope of the COVID-19 pandemic and its impact on levels of consumer confidence; actions that governments, businesses and individuals take in response to the COVID-19 pandemic; the impact of the COVID-19 pandemic and actions taken in response to the pandemic on global and regional economies and economic activity; a prolonged resurgence in the severity of the COVID-19 pandemic due to variants and mutations of the virus; the pace of recovery when the COVID-19 pandemic subsides; disruptions in the Company's ability to access the capital markets; and other factors that are described in the Company's filings with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the year end December 31, 2021, which the Company filed on March 14, 2022. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. You are cautioned not to place undue reliance on these forward-looking statements.

CONTACT:
Cambridge Bancorp
Michael F. Carotenuto
Chief Financial Officer
617-520-5520

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SOURCE Cambridge Bancorp

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