Goldman Sachs Group cut his year-end forecast for the S & P 500, but still thinks the market will rise by about 7 per cent. David Kostin, chief US equity strategist at the bankSetThe target for the index was lowered to 4300 from 4700 at the end of the year to reflect higher-than-expected interest rates and slower economic growth.

The new baseline forecast assumes no recession, which means that the price-to-earnings ratio remains unchanged at 17 times earnings at the end of the year. Goldman Sachs Group also raised his forecast for earnings per share growth in 2022 to 8 per cent from 5 per cent this year, which helps support the view that the stock market is rising. But even if the s & p 500 reaches its new target, it will still fall 10% this year.

Kostin believes the stock market is likely to rise later this year as investors become more confident that the economy will avoid a recession, but a real economic slowdown could cause stocks to fall sharply. The analyst added: "if there is a recession, the index will fall 11 per cent to 3600 points and the price-to-earnings ratio will fall to 15 times. "

If investors do find some confidence this year, it could be good news for profitable technology stocks. Goldman Sachs Group said that growth stocks have been falling across the board, and some speculative stocks have been sold off, but that may change.

Growth stocks have fallen sharply since the start of the year because of tighter financial conditions. However, high-margin growth stocks now have the same EV/sales multiple as low-margin stocks, at five times. We expect price-to-earnings ratios to diverge as investors give priority to profitability.

Goldman Sachs Group provided a list of these high-growth, high-profit companies, including two large technology companies, Meta platform and Alphabet, as well as two hard-hit semiconductor stocks, NVIDIA Corp and Micron.

In addition, when investors are faced with highly volatile financial markets, Goldman Sachs Group also put forward suggestions for stocks at the "margin of safety", saying they are too cheap to be ignored.

U. S. stocks have been under pressure this year because of persistent inflation, the Fed's rate-raising cycle, recession risks, and geo-events in Russia and Ukraine. The S & P 500 is down more than 16% so far this year. Goldman Sachs Group said: "since the beginning of this year, the US stock market has been affected by a series of macroeconomic headwinds. "

Given the current environment, Goldman Sachs Group advises clients to adopt the "margin of safety" approach-a classic value investment strategy promoted by Warren Buffett and Seth Klarman.

The principle of "margin of safety" usually refers to looking for stocks whose market price is significantly lower than their actual value. The stocks that investors like Buffett are looking for are so cheap that in an uncertain economic environment, trading can be successful even if profits are not fully realized.

Other investors have defined "safety margins" as companies with high gross margins that are more defensive and risk-resistant even if the economy slows or enters a recession.

To identify stocks with defensive and solid safety margins, Goldman Sachs Group screened companies in the S & P 500 with three key characteristics: size and liquidity, balance sheet strength and attractive valuations.