Seeking Alpha

Goldman responds to clients on overvaluation call

  • Goldman is dealing with some upset clients after its overvaluation call on the S&P 500 last week.
  • "Most client responses attempted to justify personal expectations for continued multiple expansion in 2014 ...  The low interest rate backdrop was the most common client justification for continued P/E expansion." Goldman, however, looks at P/E's vs. real rates over time and finds today's pricey no matter the rate environment.
  • "Many on the buy-side expect price gains of 10% to 20% this year ... the fact remains that market has rarely traded at a higher P/E outside of the tech bubble, or coming out of recessions when EPS were extremely low."
  • Attached charts
  • S&P ETFs: SPY, IVE, SH, SSO, SDS, IVV, SPXU, UPRO, VOO, MDY, RSP, MVV, RWL, IJH, EPS, IVW, SPYG, RWK, RPG, UMDD, RPV, SPYV, BXUB, VOOG, IVOO, VOOV, MZZ, TRND, BXUC, SFLA, SMDD, FTA, MYY, BXDB
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Comments (8)
  • bbro
    , contributor
    Comments (10313) | Send Message
     
    Looking at averages it fraught with danger unless you know where you are in the business cycle....
    21 Jan 2014, 12:19 PM Reply Like
  • idkmybffjill
    , contributor
    Comments (1710) | Send Message
     
    bbro, where are we in the business cycle?
    21 Jan 2014, 12:22 PM Reply Like
  • bbro
    , contributor
    Comments (10313) | Send Message
     
    we are 10 minutes into the second quarter or bottom of the fourth inning....
    21 Jan 2014, 12:29 PM Reply Like
  • idkmybffjill
    , contributor
    Comments (1710) | Send Message
     
    bbro, I never understood baseball and still don't. In layman's terms please? Lol.
    21 Jan 2014, 12:34 PM Reply Like
  • bbro
    , contributor
    Comments (10313) | Send Message
     
    36 minutes into the the first half of a soccer match??
    21 Jan 2014, 12:43 PM Reply Like
  • JHLLC
    , contributor
    Comments (166) | Send Message
     
    Goldman may be right. On the other hand, they may be wrong.

     

    So what's the benefit of these forecasts?
    21 Jan 2014, 12:23 PM Reply Like
  • Chris Lau
    , contributor
    Comments (2355) | Send Message
     
    Asymmetric risks are far higher in tech post-IPOs ie (TWTR), far lower with basic materials and gold. The prudent investor should load up on cash and enter positions as good opportunities make themselves available.
    21 Jan 2014, 01:12 PM Reply Like
  • Laryno
    , contributor
    Comments (8) | Send Message
     
    Goldman definitely did this to try and reverse the losses sustained by their seasonal models; an interesting discrepancy between their proprietary trading and their client's portfolios.
    21 Jan 2014, 02:30 PM Reply Like
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