These Are Goldman Sachs’ Biggest Predictions for 2021

Ayushi Vanzara

17th Dec'20

Goldman Sachs paints a rosy picture of 2021 for us. Goldman Sachs, an investment bank, in early November, published a 39-page report that delineated predictions about the US economy, monetary policies, Georgia Senate runoff and, the stock market.

Like for every prediction report, certain assumptions are kept in mind that backs the base for predictions. These assumptions, if not fulfilled, will adversely affect the results of these predictions. 

Goldman’s predictions are strongly based on the views: 

  • Coronavirus vaccine would be available by January with enough doses available to vaccinate the American population by the first half of the year.

  • The government will announce another stimulus package

  • Federal Reserve won't raise the rates 

There are several cautionary notes that one must read before reading the report. But, overall, Goldman Sachs has predicted an optimistic outcome and investors might want to take advantage of the trends anticipated.

 

Let's look at the Goldman Sach's Biggest Predictions for 2021

1. GDP will see a surge of 5.3%

The Federal Reserve's modest projection of the US's GDP is 4% whereas Goldman estimates that GDP will see a surge of 5.3% in 2021. That's a considerably high number compared to the Federal Reserve, pointing to several ramifications. High Growth or Rising GDP implies that:

  • American Corporates are doing phenomenal which in turn, should fuel the stock market

  • A  strong economy all around, indicating that Main Street would have extra money to spend.

Goldman expects a V-shaped recovery of the economy. This is terrific news as we are all trying to come out of the coronavirus recession.

Goldman Sachs has also published a similar Macro Outlook Report on India. To read the official India’s Macro Outlook 2021, click here

 

2. Unemployment will plunge to 5.3%

Just as GDP, Goldman also expects the unemployment rate to plunge to 5.3%. Goldman Sachs forecasts that as the economy recovers, the hiring will resume, decreasing the unemployment rate. However, this is contingent upon the stimulus package boost from the government. With the blue waves taking over the elections, it is expected that a fiscal stimulus package of $1trillion will be authorized, potentially before Biden’s inauguration on January 20.

 

3. Federal Reserve won't Raise Rates until 2025

The central bank of every country has a significant influence on the stock market. And so does the Federal Reserve. Everything Fed says manipulates the market to a tremendous extent as the money supply in the economy is affected by its decisions. 

Based on Fed’s announcement that it won't raise rates until inflation is consistently above 2%, Goldman expects that the Fed won't raise the rates until 2025.

Currently, the Funds rate set by the Fed is near zero and Goldman expects the Fed to keep it so until 2025.

These unusually low rates have assisted the economy to expand over the years and set records in stock markets just like it helped the recovery in 2020.

If this prediction comes true, it will have a huge impact, from the macro point of view, on the economy and the stock markets.

 

4. By the End of 2021, the stock market will spurt 19%

The bull market has been storming in 2020, with stocks making all-time new highs in November and December after huge selloffs in March. This has cautioned many analysts as the valuation of the market is getting too high.

Well, Goldman seems to be on the other side of the road as the firm expects S&P 500 to jump to 4300 by the end of 2021.

 

 

This forecast is partly based on Goldman's above prediction that the Fed won't raise rates until 2025.

To read the official redacted version of the Macro Outlook 2021 original report, click here

 

5. Additional 7% Rise in the Stock Market can be expected in 2022

Investors with massive gains in 2020 naturally have optimistic expectations for 2021. But, according to Goldman, the market trends of 2020 will not stop providing gains in that year. Rather, Goldman expects an additional rise of 7% in the S&P 500 by the end of 2022. 

If we go with the gains predicted by Goldman in 2021, the market participants should be looking forward to a total net gain of 24% over the next two years.

Generally, such long term forecasts have lower reliability. Although, with the Fed rates on hold for a foreseeable future and with the proposed economic stimulus by the Biden government, the rise of economic profits with low-interest rates is likely to remain unchanged in 2022 too as per Goldman Sachs.

 

6. Corporate Earnings to Grow 30% in 2021

With the exceptional gains prediction in the stock market, it's stupid to not see an increase in corporate profits. The primary factor of stock market gains is corporate profits without any doubt.

Despite the fact that the stock market has set new highs in 2020, revenue outbreaks will result in further gains in 2021 as per Goldman.

Goldman analysts expect the companies in the S&P 500 to report an EPS of $175 which would result in an enormous year-over-year gain of 30%.

Amidst the coronavirus epidemic, huge losses that corporations reported in 2020, such corporate earnings if reported, would be impressive and pave the path for Goldman’s stock market bullish predictions in 2021.

To point out specific industries, the Technology, consumer-discretionary, and materials sector would outperform as per Goldman.

 

7. FAAMG Continues to Prosper

FAAMG is an abbreviation coined by Goldman Sachs for Facebook, Amazon, Apple, Microsoft, Google stocks which are the top-performing stocks in the tech sector.

According to Goldman, “Fundamentals support higher valuation for FAAMG.” Goldman explains that such mega-cap tech companies offer longer duration which makes them favored in a low-interest rate territory for obvious reasons.

With that being said, and Fed keeping rates low till 2025, there's no reason why FAAMG stocks wouldn't continue to prosper. Goldman also states that “These companies have high near-term growth and low leverage, adding to their appeal.”

 

8. The Recovery Will Get Worse Before It Gets Better

After being in the dreamy world so far, Goldman Sachs also tints us with reality.

The firm predicts that things will get worse before it gets better since the financial support has largely dried up as of now. This has resulted in lower disposable income in the last months of the year.

Americans were expecting for a second $1,200 check to reach in the summer or fall in their mails. But as of December, no stimulus plan has been enacted. Lack of benefits from increased unemployment payments or any financial help at all has left them with lower incomes at their disposal that Goldman was referring to.

 

9. The Third Wave of Coronavirus is Expected to Worsen in Winter

Goldman feels that the major risk is the third wave of coronavirus which is expected to worsen in countries with colder temperatures.

This prognosis of Goldman Sachs is already blossoming with the huge rising in the coronavirus cases in early December across the country. This will not only delay the full recovery process of the economy but might result in a double-dip recession before things can get better in late 2021.

 

To summarise, fiscal stimulus packages and a vaccine is all we need to get out of this economic crisis. 

The vaccine will work as a lifeline for businesses to surge back to their normal, defreeze hiring, decrease unemployment, increase earnings. Whereas the stimulus package will work as an aid for businesses progression and consumers will have enough money to spend on more than just necessities, increasing corporate profits and overall contributing to a growing economy.

Altogether, these factors will result in a rising stock market and less unemployment as the Goldman Sachs Report anticipates.

 

Let us know your views in the comment section below.

 

To read more such articles, refer to the below-given articles:

Goldman Sachs CEO David Solomon says 90% of small businesses have exhausted PPP funds

In this article, David Solomon talks about how small businesses are struggling according to a survey conducted by them whereas markets are showing the big businesses recovery. To find out what are the key points of the survey, read more

Apple Is Building Its Own Version Of Google Search

We are all aware of the Google Search Engine but it would be an interesting feat to watch these two established superpowers fight to mark their space in the tech industry. Read more to find out the details.

High Growth Sectors of India

India’s economy is a growing economy. If you are an investor or a finance student, you must have an eye on the high-growth sectors of India. To find out, click here

Instructions to Endure Post-Pandemic Economy for Business

All businesses are fighting through this pandemic to survive and thrive. To make your endurance easier, read more

 

We, at OpenGrowth, are continually looking for trending startups in the ecosystem.  If you want to know any further information about the startup ecosystem or have any mind-boggling ideas, do refer to the other blogs at OpenGrowth. If you have any suggestions, do let us know in the comment section below.

Ayushi is currently pursuing Chartered Accountancy. No secrets there that she loves to read!  She believes words have the power of healing and is a medium that can convey like no other. She hopes to connect with people through her empathy, thoughtfulness, and by adding value to their lives.

Comments

Hawk Griffth

18th Jun'22 12:56:55 PM

Thanks a lot PINNACLE CREDIT SPECIALIST for the massive job for fixing my credit report without no traces. I was shocked with joy in my heart when he helped me repair my credit report which boost up my FICO score to 805 excellent and removed all the negative items, past eviction, hard inquiries, bankruptcy off my credit report within 8days. He eventually got my job done without charging outrageous fees. Don’t waste your time thinking about any credit specialist. Contact him now: pinnaclecreditspecialist@gmail.com phone +1 (585) 466 4373.

Special thanks to HACK VANISH, a professional hacker I’ve been hiring for the past 2 years because, I find him to be an outstanding hacker who has aided me in various hacking related issues, ranging from fixing my poor FICO credit score of about 437 TransUnion, 462 Equifax to 802 plus excellent score, tracking my cheating husband’s phone and currently has helped me recover my lost crypto funds from an online scam investment I recently ventured into, I must confess he is the best, quite brilliant, ever since I discovered him through a positive review I saw on Wallet Hub and reached out to him via Email: HACKVANISH @ GMAIL. COM, and Phone: +1(747) 293-8514, to which he responded in less than 10mins, I have never regretted working with him, he’s been quite helpful and highly efficient. I Would recommend his services to anyone without hesitation.

Melissa levy

22nd Apr'22 05:43:12 PM

I lost my job few months back and there was no way to get income for my family, things was so tough and I couldn't get anything for my children, not until a met a recommendation on a page writing how Mr Bernie Wilfred helped a lady in getting a huge amount of profit every 6 working days on trading with his management on the cryptocurrency Market, to be honest I never believe it but I took the risk to take a loan of $1000. and I contacted him unbelievable and I was so happy I earn $12,500 in 6 working days, the most joy is that I can now take care of my family I don't know how to appreciate your good work Mr. Bernie Doran God will continue to bless you for being a life saver I have no way to appreciate you than to tell people about your good services.
For a perfect investment and good strategies contact Mr Bernie Doran via WhatsApp :+1(424)285-0682 or Telegram : @Bernie_doran_fx or Email : Bernie.doranfx01@gmail.com

Nath Mary

2nd Apr'22 03:32:45 PM

I'm so happy to share this with you that can read / see this now. When I started trading binary and forex a few months ago, I really didn't have the necessary tools to trade and I lost a lot until I met Pablo Martinez who taught me all about market psychology as he managed my account for me. Today I am grateful to him for his great offer and help because it really changed my financial situation with an investment capital of $1500 and now I'm earning around $35,500 - $30,000 profits per week. Here is his WhatsApp no: +44 7520 636249 or his email address: pm7234029@gmail.com Https://www.facebook.com/PM-Fast-Trade-104912912155335/