Wall Street is past the worst: Goldman

US stocks have suffered the worst of the coronavirus crash, as long as there is no secondary outbreak, says Goldman Sachs.

Many analysts believe Wall Street is in for more shocks. Picture: AP

Wall Street has suffered the worst of the coronavirus crash, as long as there is no secondary outbreak in the United States, Goldman Sachs said.

The support that markets had received from the government and the US Federal Reserve would push the S&P 500 up 8 per cent from the pre-Easter close by the end of the year, its equity strategists predicted.

Goldman’s forecasts are closely followed, even if they are not always correct. Equity strategists at rival banks believe that markets could be in for more shocks before they recover.

This week Wall Street will be tested by first-quarter financial reports from America’s biggest banks, which serve as a bellwether for the wider US economy.

In the next few weeks earnings reports from all corners of industry will show how corporate America fared in the early stages of the coronavirus outbreak and how its leaders expect to handle the fallout.

Analysts led by David Kostin, chief US equity strategist at Goldman, said: “If the US does not experience a second surge in infections after the economy reopens, the ‘do whatever it takes’ stance of policymakers means the equity market is unlikely to make new lows. The Fed and Congress have precluded the prospect of a complete economic collapse.”

Mr Kostin and his colleagues suggested that markets were not in the middle of a so-called bear rally - an unsustainable bounce from recent lows - such as those that occurred during the 2008 crash. “The combination of unprecedented policy support and a flattening viral curve have dramatically reduced downside risk for the US economy and financial markets,” they said.

The S&P 500 share index plunged by 34 per cent from its record high on February 19 to 2,237 on March 23, then climbed 25 per cent from there to close at 2,790 on Thursday last week, before markets shut for Easter. Last week’s 12 per cent gain, even in a four-day week, was the strongest since 1974. It meant that it was trading at about 18 per cent below February’s record high.

President Donald Trump said on Monday that a decision on reopening the US economy “will be made shortly”.

The Goldman strategists said: “It is remarkable that the US is in the midst of its greatest economic crisis in nearly a century and unprecedented societal disruption while the stock market trades at the same level as it did in June 2019.”

The bank’s bullishness contrasts with its bearishness a month ago, when it predicted that the S&P 500 could fall to 2,000. The bank now expects the index to be at 3000 by the end of the year.

Wall Street closed on Tuesday (AEST) mostly lower, as indexes pared last week’s strong gains ahead of earnings reports. The Dow lost 1.4 per cent, the S&P 500 dropped 1.0 per cent and the Nasdaq added 0.5 per cent.

JP Morgan, America’s largest bank, is scheduled to report its first-quarter results on Tuesday alongside Wells Fargo. Bank of America, Citigroup and Goldman Sachs are due Wednesday. Morgan Stanley is expected to report on Wednesday or Thursday.

Volatile markets are expected to have boosted banks’ trading revenue, partly offsetting declines elsewhere.

Analysts expect first-quarter profits of all S&P 500 companies combined to have fallen by 9 per cent compared with the same period last year. Second-quarter profits are expected to decline by 21 per cent.

The Times