Goldman Sachs says the S&P 500’s returns could collapse as US economic growth peaks. Buy these shares.

Shares returned on Wednesday and the Dow and S&P 500 indexes reached their second-highest level in history, while investors continue to smile at the strong growth prospects.

Goldman Sachs’ strategies are growing in the US economy, expecting sequential annual growth in US gross domestic product to reach 10.5% in the second quarter of 2021. This would be the strongest quarterly growth rate since 1978 ( apart from growth in the middle of the end of 2020, when the economy came back from a sudden halt).

But it may not be good for stocks. Our call of the day is from the Goldman Sachs team, led by Ben Snider, which warns that as economic growth peaks, investors should expect lower returns on equity and higher volatility.

Economists at the investment bank see US GDP growth modestly slowing in the third quarter of this year, before continuing to decline in the coming quarters.

Chart through Goldman Sachs

“The slowdown in growth is usually associated with a lower return on equities, but still positive and higher volatility,” say strategists. Since 1980, the S&P 500 SPX,
+ 0.93%
recorded average monthly returns of 1.2% when economic growth was positive and accelerated, but only 0.6% when growth was positive but decelerating.

In fact, stocks are underperforming even when growth is at its peak. Investors who bought the S&P 500 when the supply index of the Institute for Supply Management was over 60 – signaling maximum growth, say strategists – recorded average returns of -1% the following month and only 3% the following year. In March, the ISM production index was 65.

But not all is bad news. Outside the US, the global economy is still in tears. Goldman Sachs economists expect growth in Europe, Japan and emerging markets outside China to peak later than in the US – in the third quarter of this year. “As a result, some cyclical parts of the US capital market should do better in the coming months than usual when US growth begins to slow,” say strategists.

Goldman Sachs GS,
+ 1.02%
has two tips: Buy globally oriented cycles compared to internally oriented cycles and buy a basket of “Europe reopening” stocks, which are left behind “US reopening” stocks.


Call for cash from Credit Suisse: The bank will raise 1.7 billion Swiss francs ($ 1.9 billion) in additional capital following the melting of the Archegos Capital hedge fund. Credit Suisse CS,
+ 0.87%
said it would lose another $ 654 million from the sale of the fire, which saw positions close to $ 30 billion liquidated in March, after an initial $ 4.7 billion hit.

Economically, initial unemployment claims should show that 603,000 Americans applied for unemployment last week, up from 576,000 the previous week. This figure is due at 8:30 am in the east, along with continued unemployment claims for the week of April 10, before existing home sales for March appear at 10 am, in tandem with peak economic indicators.

Europe is moving towards the world’s first major laws on artificial intelligence. The European Commission – the executive branch of the European Union – on Wednesday proposed restricting the use of facial recognition by police and banning certain types of AI systems.

On Wednesday, the representatives of the technological giant Apple AAPL,
+ 0.29%
and Google parent Alphabet GOOGL,
was prepared by the Senate Judiciary Subcommittee on Competition, Antitrust and Consumer Rights Policy, regarding the extended powers of the App Store and Google Play Store.

In India, COVID-19 returns with revenge. The world’s second-largest country on Thursday reported a record 314,000 new infections on Thursday as the country’s health system faltered.


Futures on the US stock market YM00


walk around the apartment after Wall Street returned to its ways of winning on Wednesday.

European shares UKX,
+ 0.06%

+ 0.46%

+ 0.62%
rose on Thursday amid a surge in strong earnings reports, but it was Tokyo that led the way higher among Asian HSI stocks,
+ 0.47%

after the Nikkei 225 NIK,
+ 2.38%
increased by 2.4% after two days of losses.


Chart through Bank of America

Our chart of the day shows the increase in sustainability reports among S&P 500 companies. In honor of Earth Day, read more about what this means and see six other charts that show the “greening” of the S&P 500.


Via Twitter

After the Financial Times first reported on Wednesday that Uber is eating UBER,
+ 0.52%
would expand in Germany, shares in rival Just Eat Takeaway TKWY,

+ 0.12%
(JET) fell by more than 4%. This stimulated a bizarre exchange between the executive directors of the two companies, initiated by the JET leader, the Dutch billionaire Jitse Groen.

Random readings

How small “beach huts” have become the hottest commodity in British real estate.

Tra-la-la: A $ 13,000 flute that disappeared nearly a decade ago in a taxi was returned to its owner after police recovered it from a Boston music store.

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