- After the S&P 500's almost 19% gain YTD, the index is now trading near its fair value relative to interest rates, profitability, and price-to-book valuations, writes Goldman Sach chief U.S. strategist, David Kostin.
- “We believe policy uncertainty and negative revisions to 2020 EPS forecasts will limit equity upside," he writes in a note.
- Lower interest rates and lower tax rates may provide some support, he acknowledges.
- In an environment of slower economic growth, Goldman is advising its clients to look for stocks with the best expected return-on-equity growth.
- Goldman's basket of 50 S&P 500 stocks with the highest consensus estimates of ROE growth has outperformed the S&P 500 by 5 percentage points YTD.
- Among the stocks in that basket are Under Armour (UA -1.5%), Apple (AAPL +2%), Cisco (CSCO +0.8%), Sempra Energy (SRE +0.6%), and Global Payments (GPN -0.4%).