Goldman to Clients: Get out of stocks before fiscal cliff hits

You can sense almost an air of desperation from David Kostin, Goldman Sachs chief U.S. equity strategist, in his latest note to clients as he pleads with them to take money out of stocks before they fall off the fiscal cliff.

In the note, Kostin vehemently defends his year-end S&P 500 target of 1250 despite the benchmark’s recent rise to above 1400. The strategist still sees a 12 percent drop ahead, believing that Congress will fail to address the fiscal cliffbefore the election, and maybe even before the end of the year.

“Political realities and last year’s precedent suggest the potential that Congress fails to reach agreement in addressing the fiscal cliff is greater than what most investors seem to believe based on our client conversations,” said Kostin.

The so-called fiscal cliff is the expiration of payroll, capital gains and dividend tax cuts at the end of this year. It also refers to the mandatory sequestration of spending that resulted from the vicious debt ceiling fight last summer.

“Last year, the deadline for Congress to raise the federal debt ceiling (explain this) was known months in advance,” states the report. “Nevertheless, Congress was unable to reach an agreement that satisfied all factions. Investors were stunned and the S&P 500 plunged 11 percent in 10 trading days.”

The worst case scenario this year is that a lame duck Congress does absolutely nothing after the election – not even kick the can down the road by voting in a short extension of the tax breaks and spending plans. Under that scenario, 2013 GDP would actually contract, according to Goldman Sachs economists.


GS have said this a few times..and have again now..check out the graph above..which shows how bad things actually are..worse than the depression..right now..


~ by seeker401 on August 24, 2012.

14 Responses to “Goldman to Clients: Get out of stocks before fiscal cliff hits”

  1. Bullish!!!

    • Honestly though…. Just want to warn traders, when GS AND Marc Faber try to get folks short it’s usually a bad time for bears….

      I would look to buy dips at least til mid sept when the fed speaks.

      • whats your thoughts on the dow going 14093 before it dumps?

      • Why that # specifically? But here is my thesis (entertainment purposes only)……

        Up til J Hole with a downside risk of S&P 1385ish….. Down til elections (late sept – nov) maybe 1300ish S&P, just so people think elections matter cause what moron would vote Romney with S&P at 1500? Then we go higher through 2013 to new highs til maybe spring time or summer, maybe hitting 1500+ on S&P.

        Going short even a few days or a week too early can destroy a trading account. So far this rally we have had has been running on bears getting whacked and the squeeze rally is on.

        Just buy Silver Bitchez!

  2. I have a bad feeling that we may see all time highs. Lotso debt out der.

  3. The fact these folks come and say this after a minor drop like we had the past few days is just going to end up adding fuel to the fire. I think we see another 1-2% up day for an unreal short squeeze after they lure in the suckas.

  4. The DJIA has declined four straight days after (almost) setting a 52-week high. In the past 30 years, that has occurred 28 times, and none of them marked an important market peak, with the Dow closing at a new 52-week high an average of 14 trading days later (and no longer than 86 days). Prior to the past 30 years, 17 out of 57 occurrences marked a lasting market peak. FROM -Sentimentrader

  5. well, i’m short from ES 1417 last night. i have crash cycle into december. sucks to agree with GS, cuz i’d usually fade that shit.

    sept is right around the corner.

  6. […] Goldman to Clients: Get out of stocks before fiscal cliff hits ( […]

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