Last night, Goldman Sachs released its 2015 US stock outlook–and it was nothing to get excited about.
European Pressphoto Agency The firm’s David Kostin and team expect the S&P 500 to rise to just 2,100 by the end of next year, good enough for a total return of 5% but not much more. Even worse, the opportunities for “alpha” will continue to be few and far between as market volatility remains low, forcing investors to look for other ways besides stock picking to juice returns.
Kostin points to three themes that will help do just that in 2015:
(1) Fundamental: Own US stocks with high domestic sales and avoid firms with high Europe revenue exposure. (2) Income: Own stocks returning cash to shareholders via buybacks and dividends. Sell upside S&P 500 calls to enhance returns. (3) Technical: Buy stocks with low turnover to capture illiquidity premium and sell stocks with high average daily volumes as a percent of free float.
Stocks with low turnover include Philip Morris International (PM), Schlumberger (SLB), Johnson & Johnson (JNJ), General Electric (GE) and Automatic Data Processing (ADP).
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