The U.S. is unlikely to spiral into a recession due to Brexit, but, unfortunately, that won’t save investors.
On Friday, in his most recent note on the market, Goldman Sachs’ top U.S. stock market strategist predicted the rest of the year in the market will be a serious disappointment.
“Our year-end target remains 2,100, reflecting a potential 6-month return of 0.1%,” the Goldman Sachs analyst team wrote, which is headed by David Kostin, referring to the compounded annual return of the S&P 500 in a report titled “Flat is the new up.”
That represents a return of 2.74% for the whole year. That’s above the S&P 500’s return of 1.4% in 2015, but considerably below the S&P 500’s average returns over the past 10 years of 7.25%.
And don’t expect markets to rally in the first half of 2017, either. Goldman added that the S&P will likely trade at 2125 in 12 months—representing a 1.24% return from now.
And that’s if the economy only gets mildly worse. Right now, Goldman is only predicting that Brexit will be a mild hit to the U.S. economy, lowering growth by a tenth of a percentage point this year, and a fifth of a percentage point in 2017.
But things could end up being a lot worse. Goldman, for instance, is also expecting the U.S. 10-year treasury yield the end the year at 2%—down from its previous estimates of 2.4%. That would be a major improvement from where yields are now, which is around 1.30%.
If the economy does worse that Goldman expects, even its current downer of an outlook for investors could end up looking overly optimistic.