Goldman says earnings may grow just 3% this year


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The Apple logo is seen on the window at an Apple Store on January 7, 2019 in Beijing, China.

Goldman Sachs is predicting that earnings growth in 2019 could be quite disappointing, advising clients to steer clear of companies leveraged to strong economic growth.

In a research note to clients this weekend, the firm gave a forecast that should worry bullish investors, warning that the waning fortunes of several big consumer brands were sounding a warning about corporate profits this year.

“Weak guidance from several notable companies such as Apple and Macy’s have heightened the focus on S&P 500 earnings growth,” wrote David Kostin, chief equity strategist for the firm.

“Earnings had been one of the clear bright spots for U.S. equities throughout much of 2018, but some investors are now questioning whether profits can continue to grow in 2019,” he added.

Fourth-quarter earnings season is about to kick off. After it’s all said and done, 2018 total earnings growth will come in at a whopping 22 percent, Goldman estimates, juiced by the tax cut. But that’s in the past: During this upcoming earnings season, company outlooks could be cautious and reflect fears of slowing economic growth this year, the firm said.

For now, Goldman’s “baseline” scenario is for earnings to increase for S&P 500 companies by 6 percent in 2019. But that figure assumes a pace of economic growth faster than what Goldman’s own economists believe will come to fruition.

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