US stocks have likely bottomed following trillions of dollars of coronavirus relief, Goldman says

• The government's trillions of dollars in fiscal and monetary relief likely established a stock market bottom, Goldman Sachs said Monday.
• Slowing coronavirus infection rates in some of the US's largest hotspots further support Goldman's argument that the S&P 500 will avoid sliding further and can still rebound to 3,000 by the end of the year.
• Investors aiming to ride the upswing should focus less on near-term earnings announcements and instead look to 2021 guidance for profit recovery forecasts, the bank said.
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Widespread fiscal and monetary support issued in the wake of the escalating coronavirus have likely prevented the stock market from falling further, Goldman Sachs said Monday.

Recent weeks have seen the federal government release more than $2 trillion in fiscal aid through direct payments, business loans, and bolstered unemployment insurance programs. The Federal Reserve has stepped in with a similar agenda, using its financial-crisis playbook alongside new policies to boost market liquidity and lending activity.

Certain US virus hotspots have also seen their rate of new infections slowly flatten as weeks of social distancing measures begin to affect the coronavirus's contagion. The optimistic data and hefty policy response should create a strong backstop for stock prices if the outbreak is efficiently contained in the coming months, Goldman said.

"The Fed and Congress have precluded the prospect of a complete economic collapse," the team led by David Kostin wrote in a note to clients. "These policy actions mean our previous near-term [S&P 500] downside of 2,000 is no longer likely."

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The bank still sees the benchmark index reaching 3,000 by the end of 2020. The S&P 500 closed at 2,789.82 on Thursday after posting its best week since 1974.

Investors aiming to ride the market upswing should look past near-term earnings reports and instead focus on firms' plans for recovery in 2021, the team wrote. The Securities and Exchange Commission issued a similar warning on April 8, suggesting previous profit forecasts have likely lost some relevance as the pandemic ravages the global economy.

Next year's earnings-per-share multiples will play a more important role than usual in determining 2020 stock prices, Goldman said.

Despite the trillions of dollars in aid, a second wave of virus infections could break the market floor and push prices to fresh lows, the bank added. The government's "do whatever it takes" attitude helped quickly stem further losses, but a resilient bull run depends on economic data improving in April, the team said.

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