Goldman Sachs: ‘Rational exuberance’ will drive the stock market.
The meteoric rise of stock prices in the late 1990s is now widely considered to be the result of irrational exuberance among investors. However, Goldman Sachs believes that the current stock market rally is nothing like that.
This time it is different. This at least according to Goldman Sachs. Goldman is forecasting that the market will experience “rational exuberance” over the next three years. That is because prices and valuations are supported by #earnings growth.
“The current equity market valuation is certainly stretched in historical terms. However, it does not appear unreasonable based on the high level of #corporate profitability.” This according to David Kostin of Goldman.
Goldman’s earnings growth estimates are predicated on the passing of the tax cut bill, higher GDP growth and higher oil prices. Furthermore, there will be winners and losers among various sectors.
In particular, among the companies that would likely benefit the least from a tax cut are technology and health-care. That is because their effective tax rates are already the lowest.