- Goldman Sachs is forecasting a much more difficult year for stocks in 2020, and says it's going to do serious damage to Apple and several other tech and consumer discretionary companies.
- David Kostin, the firm's chief US equity strategist, says Apple could drop 35% this year as momentum fades. He also thinks its earnings growth in the next few years looks relatively unimpressive.
- Kostin calls for a sell-off of 20% or more in 10 stocks, and six are in the consumer or tech sectors.
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Investors had a lot to be happy about in 2019 as all kinds of assets went up - but when almost everything rises, some are inevitably going to be overpriced.
In forecasting a much slower year for the market, Goldman Sachs chief US equity strategist David Kostin is pointing out the stocks that he thinks are most likely to be riding for a big decline in 2020.
Kostin expects the S&P 500 index to inch up less than 5% this year to a final target of 3,400. That's below the market's long-term average and represents a big slowdown compared to last year's dramatic gain.
But a more sluggish and volatile market could dish out a lot of pain to stocks that have had a lot of momentum recently. And his concerns are centered around technology and consumer discretionary stocks, which have dominated throughout the almost 11-year bull market.
"In 2019, Info Tech returned 50%, the best of any sector, and accounted for 32% of the rise in the overall index. Only two other sectors, Financials (+32%) and Communication Services (+33%), outpaced the market," he wrote in a note to clients.
Kostin says both of those sectors are overvalued based on their likely growth over the next five years.
Foremost among those companies is the biggest name on the market. Apple has doubled in value in a year, stretching its market cap to $1.3 trillion, and Kostin says the rally - which included a 31.5% surge in the fourth quarter - has gone way too far.
Goldman estimates that Apple's profits will come up well short of Wall Street forecasts this year, and that the tech giant will see its earnings grow at about the same rate as the rest of the market over the next two years.
Perhaps less surprising is that he believes some big-name retailers still have a lot of pain and suffering ahead of them after they struggled badly last year.
So at least Apple will have company if it's going to disappoint investors. Kostin says nine other S&P 500 stocks are on track for declines of 20% or more this year.
Those stocks are ranked below in increasing order of how far they'd have to fall from their December 31 closing prices to reach Goldman Sachs' price target.
