Worried about the deterioration of the U.S. economy, Goldman Sachs' chief U.S. equity strategist: Every rebound of the S&P 500 may be temporary

Recently, the U.S. stock market has shown weakness, with the S&P 500 index at one point erasing all gains for 2024 during Friday's trading session.

In response, Goldman Sachs has issued a warning regarding the outlook for U.S. stocks. Strategist David Kostin believes that any rebound in the S&P 500 index may be temporary, and the current positioning levels are still insufficient to trigger a "tactical rally due to underpositioning." He emphasized:

"To fully reverse the recent weakness in the stock market, the outlook for U.S. economic growth must improve."

It is noteworthy that Kostin was a staunch bull on U.S. stocks for 2024. However, for 2025, he believes that “stock returns will be lower than last year, consistent with the trajectory of earnings growth,” indicating a more moderate market outlook.

Economic Growth Concerns Dominate, Rebound May Be Difficult to Sustain

So far this year, the U.S. stock market has performed poorly, partly due to investors' concerns about the high valuations of tech giants. On the other hand, investors are also questioning whether President Trump's "America First" policy could trigger inflation and lead to an economic slowdown.

These concerns are directly reflected in market performance. Year-to-date, the S&P 500 index has only risen about 1%, while the MSCI Global Index (excluding the U.S.) has increased by 5%. U.S. stocks have significantly lagged behind international markets.

Kostin emphasized that "an improvement in the outlook for U.S. economic growth will be a necessary condition to fully reverse the recent weakness in the stock market," and he has lowered the full-year earnings growth expectation from 11% to 9%.

Scott Rubner, Managing Director of Goldman Sachs Global Markets, also expressed doubts about the sustainability of a rebound in U.S. stocks in another report. Rubner turned bearish last month, citing a decrease in inflows from buyers such as retail investors. He pointed out that the market is currently in the final stage of position cleaning.

Morgan Stanley's well-known bear Michael Wilson also stated that stocks may be more sensitive to economic growth than to the decline in bond yields. This means that even if bond yields decrease, the stock market may still come under pressure if the outlook for economic growth is poor