Goldman Sachs boosts its 3-month stock forecast to 'overweight,' cites strong profit-growth recovery

• Goldman Sachs has raised its three-month stock forecast to "overweight" and is forecasting returns in the "high single digits" for global stocks over the next 12 months.
• In a recent note, Goldman said the strong recovery in global earnings growth led to the overweight rating.
• Goldman said that the most important factor for determining growth for next year is further clarity on the timeline and availability of the coronavirus vaccine.

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Goldman Sachs just raised its three-month stock forecast to "overweight" from neutral, and is forecasting "high single digital returns" for global stocks over the next year.

In a recent note, a team of Goldman Sachs strategists led by Christian Mueller-Glissmann cited a strong recovery in global earnings growth and the lower cost of equity as reasons for the elevated forecast.

Goldman also said there's potential for a "broader procyclical shift" in stocks and other assets for the rest of the year.

"We have shifted more cyclical on sectors and themes tactically but still prefer growth vs. value on a strategic horizon," Goldman said. "In the near term, elevated uncertainty on US elections and a better global growth outlook might benefit non-US equities more, but in the medium term a large weight in structural growth stocks is likely to support the S&P 500."

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Goldman added that the "most important catalyst" to lower near-term risks and generate more growth optimism for the next year is further clarity on when and how a coronavirus vaccine will be deployed.

Other near-term risks for growth include the waning US fiscal support, US election uncertainty, rising COVID-19 cases, and volatile oil prices, the note said. However, Goldman said its economists have a bullish, above-consensus growth outlook and cited better data in both manufacturing and services as signals for a strong growth recovery.

Goldman also highlighted that the S&P 500's all-time highs from this summer were not due to a large pick-up in growth optimism but to further declines in real yields.

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