Could Goldman Sachs’ 2020 predictions for the US share market spell the end of the ASX 200s remarkable rise?

The S&P/ASX 200 Index (ASX: XJO) is relatively flat today after a week of solid gains – up 0.21% at the time of writing to 5,831.3 points. If you’ve been watching the progress of the ASX 200 over the last month, you might be getting excited. That elusive 6,000-point threshold seems tantalisingly close at these levels.

As is normally the case, our market rally is being mirrored over in the United States of America. Since 23 March 2020, the S&P 500 Index (which measures the performance of the 500 largest companies in America) has rallied over 36%. The ASX 200 has rallied by over 28% since the same day (coincidentally the market bottom for both indexes).

An ‘unloved but welcome’ share market rally?

But according to MarketWatch, analysts from US investment banking giant, Goldman Sachs are calling this an “unloved but welcome” share market rally. Goldman’s analysts have set a ‘target’ for the S&P 500 of 3,000 points by the end of the year.

This morning (our time), the S&P 500 closed at 3,055.73 points. This means Goldman is assuming the markets stay more or less flat at these levels for the rest of the year.

So how does Goldman Sachs justify this semi-bearish target? The analysts describe the recent rally we’ve just experienced as a “remarkable journey”. But it’s also one they see as most likely stopping due to “numerous medical, economic and political risks dot the investment landscape”.

They postulate that “in the near-term, the index could move to 3,200 but any bumps in the road to economic reopening or further political risks could send the index to 2,750”.

As such, Goldman’s analysts are predicting that the US share market rally has already priced in a strong economic recovery.  Thus, the fulfilment of this prediction will not result in markedly higher share prices, rather providing “validation” of the current levels.

What would this mean for ASX shares?

As I alluded to earlier, the ASX 200 is more connected to the S&P 500 and the broader US markets than many investors realise. If Goldman Sachs’ predictions turn out to be accurate, I think it’s a reasonable conclusion to make that the ASX 200 will also be relatively flat for the rest of the year, as most of the concerns Goldman has can be translated effectively to the ASX 200 as well.

But, of course, successful investing isn’t about trying to predict where the markets will be in six month’s time in my view. It’s about finding high-quality companies at great prices that you can hold as long-term investments. Whether or not Goldman Sachs’ analysis is a means to this end is up to you!

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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