Goldman Sachs: US firms to see no earnings growth in 2020 as Covid-19 spreads

Goldman Sachs said the latest forecast reflects a severe decline in Chinese economic activity in the first quarter, lower demand for US exporters, supply chain disruptions and a slowdown in domestic economic activity. — Reuters pic
Goldman Sachs said the latest forecast reflects a severe decline in Chinese economic activity in the first quarter, lower demand for US exporters, supply chain disruptions and a slowdown in domestic economic activity. — Reuters pic

NEW YORK, Feb 27 — US companies will generate no earnings growth in 2020 as the coronavirus spreads beyond China, deepening risks to global growth, Goldman Sachs said today.

The bank’s analysts cut their baseline earnings per share estimate for S&P 500 index companies to US$165 (RM695) from US$174 in 2020, implying that profits will likely remain unchanged from a year ago.

Analysts had forecast a 7.7 per cent rise in earnings, according to Refinitiv data.

Goldman Sachs said the latest forecast reflects a severe decline in Chinese economic activity in the first quarter, lower demand for US exporters, supply chain disruptions and a slowdown in domestic economic activity.

The virus, which is believed to have originated in a market selling wildlife in the central Chinese city of Wuhan late last year, has infected about 80,000 people and killed more than 2,700, the vast majority in China. In the past week, several other countries also reported a spike in cases.

Goldman said it expects the S&P 500 to trade around 2,900 points in the near-term, which is 14.4 per cent below the index’s record closing high hit on February 19, assuming the US 10-year Treasury yield drops to one per cent.

If the yield climbs to 1.5 per cent, Goldman expects S&P 500 to hit 3,400 by the year-end.

Earlier in the day, Bank of America cut its world growth forecast to the lowest level since the peak of the global financial crisis in 2009. — Reuters

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