Goldman Sachs Lowers Growth, But Still Too Rosy (GS, SPY)

It has become the newest game on Wall Street in the last month to lower global growth targets for 2011 and 2012 over the last six weeks.  What is amazing is that there is still a phantom growth expectation yet the catalysts for such growth remain more than elusive.

Goldman Sachs Group Inc. (NYSE: GS) has lowered the global growth targets now for 2012 from 4.2% growth down to 3.5% growth. As far as the United States, Goldman Sachs sees 1.7% growth in 2011 and now sees 1.4% growth for 2012.  The S&P 500 (NYSE: SPY) closed just shy of 1,100 on Monday and the new target for the S&P has been taken down to 1,200 from 1,250… Where this 9% rally will come from is anyone’s guess.  The earnings target has been trimmed as well to $98 EPS from $102 EPS for 2012 as well, implying that the S&P trades at 11.2-times 2012 estimates.

The firm sees a mild recession taking place as 2011 turns into 2012 and France and Germany are expected to be in the red zone as well. European growth was cut by 0.1% to 1.6% for 2011.  This trend should also bring on interest rate cuts from the European Central Bank as well as some other easing measures in local economies in Europe.

Leading commodity targets were cut as well.  The Brent Sea Crude target for 2012 has been cut to $120 from $130 and WTI has been cut to $109 from above $120. Copper targets were cut to $9,200 from almost $10,800 per tonne.

This comes ahead of Ben Bernanke’s testimony.  Do not be surprised when Mr. Bernanke joins in with the other Fed governors lowering some growth targets even from the most recent FOMC meeting when they threw some $400 billion into ‘operation twist’ in September.

Here was our own chart repoting and analysis for the death of risk in emerging markets.  It is brutal.

JON C. OGG