With 48 percent of the S&P 500 reporting, quarterly earnings are up 22.5 percent from the same period a year ago, according to FactSet. However, some corporate officials have expressed worry about the road ahead, particularly concerning the impact tariffs and rising interest rates will have on growth.
Kostin said that some of those concerns are justified. For instance, Goldman figures GDP will start cooling off soon, eventually ebbing to a 1.6 percent growth rate by the fourth quarter of 2019.
“But not all assets are pointing to an imminent economic downturn,” he said, citing railroads as one. Corporate credit spreads also have not widened to an extent that would suggest a major slowdown.
Companies have been in a silent period for buybacks, but that will pick up soon. Goldman has forecast total repurchases this year of about $1 trillion, which it expects to support the firm’s 2,850 price target for the S&P 500.
Kostin reiterated his recommendation that investors stick to top-quality companies — low debt levels, stable sales and earnings growth, a high return on equity, and a low risk of susceptibility to market drawdowns.
That group would typically outperform as the economy slows down at the late stages of the business cycle.