Goldman strategist says stocks will bottom once Fed signals shift

Goldman strategist says stocks will bottom once Fed signals shift

Stocks















Bloomberg

The selloff in equities will reach a bottom once the Federal Reserve signals the end of tightening, which may not happen until recession is apparent, according to Goldman Sachs Group Inc.

“It may be necessary for the market to become more confident than it is that financial conditions tightening has been sufficient and that the Fed has delivered and signalled enough tightening,” Goldman’s strategist Vickie Chang wrote in a note. “Monetary policy has historically stopped tightening about three months before equities bottom, and shifted to easing about two months afterwards.”

US equities have slumped this year amid investor concerns that the Fed will plunge the economy into a recession with its active monetary tightening amid soaring inflation. The S&P 500 flirted with a bear market, while the Nasdaq 100 is down more than 25% in 2022 as frothy technology shares have led the selloff on worries about higher rates curbing future earnings growth.

“A shift to Fed easing is unlikely without a clear move into recession, but — as in late 2018 — a clear signal that tightening risks are receding may be sufficient,” said Chang.

The Fed raised