Goldman Sachs’s Cohen Predicts More Bad News on Banks (Update1)
By Ken Prewitt and Gareth Gore
March 27 (Bloomberg) -- There may be more bad news on banks even as the U.S. economy improves in the second half of 2009, Goldman Sachs Group Inc.’s Abby Joseph Cohen said.
“We’re certainly not yet in the clear -- whether in the U.S. or around the world,” the 57-year-old strategist said in a Bloomberg Radio interview in New York today. “Whilst we have had a great deal of bad news on banks, we think there is still more to come.”
The U.S. economy is looking “less bad” and may post positive growth by the end of the year as the government’s efforts to stimulate the world’s largest economy feed through, Cohen said. “The situation in Europe is of concern to us and economic activity in many countries is still lackluster.”
The Standard & Poor’s 500 Index has clawed back 23 percent since reaching a 12-year low on March 9 as banks from Citigroup Inc. to JPMorgan Chase & Co. said they made money in the first two months of 2009 and U.S. Treasury Secretary Timothy Geithner unveiled plans to rid financial firms of toxic assets.
Stock prices got “too cheap” about a month ago, according to Cohen. “Recessions are difficult and uncomfortable when you are going through them, but they do end.”
Cohen was replaced in March last year by Goldman Sachs as the bank’s chief forecaster for the U.S. stock market. She is known for her bullish predictions during the 1990s stock-market rally. Her year-end forecast of 1,675 for the S&P 500 at the beginning of 2008 was second only to the prediction of 1,700 from Bear Stearns Cos.’s Jonathan Golub, HSBC Holdings Plc’s Kevin Gardiner and UBS AG’s David Bianco.
S&P 500 Forecast
The S&P 500 has a 12-month fair value of 1,025, Cohen said today. That’s 23 percent above yesterday’s closing price of 832.86 and is based on “fundamental” value of stocks in the benchmark, according to the strategist. Profits in the measure will be near $40 a share on average this year, she added.
Cohen’s forecasts came a day after Nouriel Roubini, the New York University professor who predicted last year’s economic crisis, said U.S. stocks will fall and the government will nationalize more banks as the economy contracts.
In contrast, Templeton Asset Management Ltd.’s Mark Mobius and Traxis Partners LLC’s Barton Biggs said earlier this week that equities are poised to rally as government efforts to revive the economy and banking system begin to work.
To contact the reporters on this story: Ken Prewitt in New York at kprewitt@bloomberg.net; Gareth Gore in London at ggore1@bloomberg.net.
Last Updated: March 27, 2009 08:51 EDT
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