GS: Decline between 20 and 25% for US indices with 10-year interest rates at 4.5%

If 10-year interest rates reach 4.5 percent by the end of the year, stocks may see a sharp decline, according to the US investment bank Goldman Sachs Group Inc.
Stress tests made by the bank indicate that raising interest rates to 4.5 percent would trigger a serious fall in indices, according to analyst Danuan Sturvenen. He also commented that under such a scenario, the US economy would likely be seriously delaying, but would hardly get into recession.
An increase in interest rates to 4.5% by the end of the year would result in a 20 to 25% decline in stock prices, the analysis said.
While the recent decline and correction of the indexes are largely predetermined by the rise in 10-year bond yields, interest rates are expected to continue rising to 3.5 or 4%.
A drop between 20% and 25% in indices, from their peak at 2 872.87 points, would mean a drop to around 2 155-2 298 points. The indices ended last week at 2,747.30 points.
The broad US index, however, reached the lowest value of 2 581 points on 8 February.
If Goldman's scenario materializes, that would mean a long way down for the US indices.

GS: Stopping the US government will take 0.2% of the GDP growth

The US investment bank Goldman Sachs predicts that the US government's shutdown will reduce GDP growth by 0.2% in the first quarter, but will soon be lived thru.
The negative effect is expected to be offset in the second quarter of the year if it is assumed that the government's shutdown will be restored by then.
According to the bank, the impact of this event on the financial markets will be "minimal".
Such government stopovers will have a lesser impact on the US economy, GS predicted.
Now that the federal government has failed to negotiate a new increase in the debt ceiling, the GDP of the world's largest economy is expected to fall by 0.2 percentage points for each week in which this event is in place, GS said.
The bank, however, is clearly not worried that this will last too long, or that the damage to the economy will be excessive, predicting a minimal impact on growth for the whole year.

GS: Correction but not end of the bullish market

The growth of stock markets, which leads them to new historical records, creates a risk of correction, but not for the end of the bullish market. At least such is the opinion of experts from Goldman Sachs Group Inc.
US indexes rose to new records, driven by optimism among investors, that tax reforms taken by the Trump administration will drive US companies' profits to their best growth for many years.
The GS reminded that MSCI World Index and MSCI Emerging Market Index are in their longest winning series, with no adjustment of 5 and 10%. Despite the danger of corrections, with a similar magnitude, however, we are unlikely to witness a bearish market.
For the bearish market, investors receive a top-level adjustment of more than 10%. The traditional bearish market, however, includes a decline of more than 15% of the peaks. In other words, according to analysts of the US Investment Bank, at this stage there are no symptoms of a drop of more than 10%.
The Fed and the rise in interest rates on the reserve are cited as the most likely cause of a potential correction of US indices.
In addition, almost all of the world's leading stock indices are in overpriced territory. In practice, almost no major index is in over-sold territory.
The GS are far more pessimistic in their ratings with respect to bonds. According to bank experts, bond markets are far more threatened by the potential policy of raising interest rates from the reserve.

Goldman Sachs: Investors have become more favorable for the euro

Currency strategists at Goldman Sachs have identified a change in the behavior of market participants amid recent signals and raising forecasts by the ECB and a warning that in the absence of deterioration in the nature of incoming data in the coming weeks, the rhetoric of central bank may become more confident.
At Goldman Sachs believe that the ECB is too optimistic in their forecasts for economic growth and inflation, there is potential for further adjustment of ECB policy.
Bank analysts believe that the recovery of the euro will be felt in the crosses (Fed factor is eliminated) and retain their quarterly forecast for EUR/GBP at 0.90 level and at the level of 127 for EUR/JPY.