The market is still a long way from seeing stocks hit a bottom and interest rates come down, Goldman Sachs chief equities strategist says

• The stock market is still a long way from hitting a bottom, Goldman Sachs' Peter Oppenheimer warned.
• Meanwhile, markets are similarly far off from seeing interest rates come down.

The market is still a long way from seeing stocks hit a bottom or interest rates coming down despite good news on the inflation after October's Consumer Price Index reading, according to Goldman Sachs chief equities strategist Peter Oppenheimer.

"We don't typically get markets reaching trough until interest rates start to come down, and we're still a little way away from that," Oppenheimer warned in an interview with Bloomberg on Monday, dismissing recent gains spurred by news of China's reopening, falling gas prices, and cooling US inflation.

Those events have fueled hope the Federal Reserve could soon pause its aggressive rate hikes, which have weighed heavily on stocks throughout the year. But equities still have room to fall, Oppenheimer argued, pointing to the fact that the S&P 500 is still trading a price-to-earnings multiple of 17x, a sign that stocks are still considerably overvalued. And despite the recent rally, some analysts expect US earnings growth to clock in close to zero next year, he warned, with a more severe slowdown in European earnings.

That's because companies are still struggling with high interest rates and a soaring US dollar. Morgan Stanley's top stock strategist Mike Wilson predicted earnings expectations for 2023 were about 20% too high, and the S&P 500 would likely fall 24% early next year and bottom out at 3000.

Oppenheimer didn't believe a decline would be that severe, adding that bank and corporate balance sheets are still strong, and the US will likely avoid a hard landing. But he warned investors of more volatility ahead until interest rates start to coming down.

"I think the market is going to be exposed on margin to more difficult news to come through, particularly on growth in the coming months. And we don't think we've hit yet the sort of conditions that we would typically see in a genuine trough in the bear market, that helps form the case for a sustained rebound," Oppenheimer added.

The Fed has raised rates nearly 400-basis-points this year in its battle to tame inflation, though prices remained high at 7.7% in October. That implies rates will be elevated until prices come down closer to the Fed's 2% target. The counterargument from the bulls has been that Fed policy is in response to lagging indicators, meaning it's possible inflation is already well on the way down and the central bank risks overtightening if they press forward with rate hikes.