David Kostin - Goldman Sachs Group


Last quote by David Kostin

The current White House tax reform proposal would reduce the federal statutory corporate tax rate to 20%. Based on the current effective tax rate, the proposed change would lift S&P 500 ROE by roughly 100bp [basis points]. If the federal statutory corporate tax rate instead moved to 25%, S&P 500 ROE would increase by roughly 50 bp.feedback
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David Kostin has been quoted 79 times. The one recent article where David Kostin has been quoted is Without tax reform, the stock market is overvalued. Most recently, David Kostin was quoted as having said, “While we expect the modest rebound in S&P 500 [return on equity] will continue in 2017, a substantial increase in profitability in 2018 will likely require policy tailwinds.”.
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David Kostin quotes

Aug 28 2017 - Facebook

Popular technology stocks … remain an important part of hedge fund and mutual fund portfolios. Facebook and Alphabet are constituents of both our Hedge Fund VIP and Mutual Fund Overweight baskets.feedback

Aug 28 2017

Both mutual funds and hedge funds have enjoyed strong YTD returns … Key sector overweights lead to outperformance. High allocations to the Information Technology sector have boosted fund returns this year.feedback

Aug 15 2017 - Trump Presidency

Managers remain optimistic that the Trump Administration's platform of deregulation, tax reform, and infrastructure spending will eventually boost economic growth.feedback

Aug 15 2017 - Trump Presidency

Improvement in business sentiment was widespread following last year's presidential election, but most company managements still have not seen it translate into higher demand.feedback

Aug 08 2017 - Trump Presidency

The bottom-line question is, is you're looking at what's in the market today versus looking around the corner at what's there likely to be.feedback

Aug 03 2017

These firms are among the cheapest in their sector on adjusted FCF yield (offering value) and have invested the most in growth capex and R&D over the previous three years (offering growth).feedback

Jul 28 2017

The tech sector will benefit from robust expected sales growth relative to the rest of the market, while the prospect of higher interest rates and the ability to return capital to shareholders will benefit financials. The positive fundamental trends in both sectors will likely result in a more normal positive correlation of returns between financials and info tech.feedback

Jul 24 2017 - Amazon

Put simply, growth will drive technology share prices higher while change in growth will support the performance of financials ... We expect both sectors will outperform going forward, but for different reasons. The tech sector will benefit from robust expected sales growth relative to the rest of the market while the prospect of higher interest rates and the ability to return capital to shareholders will benefit financials.feedback

Jul 24 2017 - Amazon

During periods of modest economic growth, investors gravitate to the scarce commodity: stocks with secular growth prospects.feedback

Jul 10 2017 - Oil

Energy EPS is therefore at risk from lower oil prices (lower revenues) and higher rig counts (higher costs). Consensus EPS estimates for Energy have already been revised down by 15% since the start of 2Q. Additional negative revisions to full-year Energy profits would pose a risk to overall S&P 500 EPS growth, given 25% of 2017 EPS growth is expected to come from Energy alone.feedback

Jul 10 2017 - British Petroleum

Consensus expects Info Tech margins will decline by 31 bp (basis points) in 2Q. Many wage measures have shown signs of deceleration in recent months. However, given that the US economy is at full employment, our US Economics team expects wages will continue to rise. … The combination of wage pressures and weakness in Autos and Retailing will weigh on Consumer Discretionary earnings, which are expected to fall by 3% in 2Q, the most of any sector.feedback

Jun 28 2017

The slow pace of US economic growth has benefited Information Technology so far in 2017. The YTD return for the sector is double that of the S&P 500 (21% vs. 10%). We expect this trend will persist in 2H 2017 as growth opportunities remain scarce in a modest GDP growth environment.feedback

Jun 28 2017

Financials is most sensitive to changes in bond yields, as higher rates boost net interest margins. Our interest rate strategists expect that the US 10-year Treasury yield will rise to 2.75% by year-end.feedback

Jun 26 2017

Our new estimate excludes any boost from tax reform in 2017 and also accounts for weaker activity in 1Q. Higher return potential in major non-US equity markets vs. the US and a political stalemate in Washington D.C. suggest foreign investors will be net sellers of US stocks in 2H.feedback

Jun 12 2017 - British Petroleum

Perhaps most remarkable is the outperformance of stocks with strong balance sheets alongside a rallying equity market and extremely easy financial conditions ... our basket of S&P 500 firms with Strong Balance Sheets (GSTHSBAL) has outperformed our Weak Balance Sheet basket (GSTHWBAL) by 520 bp during the last six months. Strong balance sheet outperformance in a 10%+ equity market rally is rare; occurring in only 5% of six-month stretches in the last 30 years. One notable episode was in 2000, at the Tech Bubble peak.feedback

Jun 12 2017

The unexpected mix of healthy growth and declining rates represents a Goldilocks scenario for U.S. equities.feedback

Jun 08 2017

Value has historically posted its strongest returns during periods of strong economic growth early in the economic cycle. The factor typically wanes late in the cycle as investors search for secular growth opportunities when economic growth slows. Concerns about the possibility of 'secular stagnation' in recent years have compounded the investor hunt for growth.feedback

Jun 08 2017

A modest growth environment means that growth is still relatively scarce. So the growth stocks … [where] tech is a prominent area, are likely to continue to do well and outperform.feedback

Jun 05 2017

Follow the proverbial 'smart money.' The favorite stocks shared by both mutual fund and hedge funds have generated higher median YTD returns than the consensus most out-of-favor stocks.feedback

May 02 2017

Infatuation with buybacks has ended for both companies and investors. Experience shows that firms repurchasing shares at extremely high valuations regret those actions when the stock price inevitably de-rates.feedback

May 02 2017

The delay in tax legislation means firms will not augment cash allocated to buybacks until reforms are clear.feedback

Apr 11 2017

My characterization that early March will be the point of maximum optimism reflects that view. … [With the] latitude of what might have taken place, whether it's health care, whether it's tax reform at the beginning of March ... now as the days go by, the degrees of freedom start to narrow ... maybe the tax reform will take place, but it might not take place till next year. We focus on financials and technology as areas for better growth. That's how we set up a portfolio now.feedback

Apr 10 2017

Given the late stage of the economic cycle, higher wages, inflation, and interest rates suggest that margin increases this year are unlikely. Lower margins will translate into further negative EPS revisions in 2017.feedback

Mar 27 2017 - American politics

The boost to S&P 500 earnings from a lower corporate tax rate is likely to be smaller and to occur later than investors originally expected. The S&P 500 fell ... this week as investors came to terms with greater policy uncertainty. Debate over the Republican health care plan, the American Health Care Act, sparked investor concern about the probability and timing of anticipated policy tailwinds to earnings.feedback

Mar 27 2017 - Trump administration

Our Washington, D.C. economist expects legislation that lowers the corporate tax rate and makes incremental tax reforms to be enacted by late 2017 or early 2018, meaning corporate earnings will likely not be affected any earlier than next year. The Trump Administration has called for broad deregulation and investors are focused on financials as the firms with the most to gain. Our banks analysts expect that reform will likely come through changes to existing rules as well as the interpretation and application of outstanding regulations.feedback

Mar 20 2017

In 2017, we expect history will repeat itself. Corporations and (exchange-traded funds) will continue to drive equity demand while mutual funds, households, and pension funds will remain net sellers of equities.feedback

Mar 13 2017

Our tactical view remains that S&P 500 has peaked at 2,400 and will fade to 2,300 by year-end.feedback

Mar 13 2017

In fact, revisions to consensus EPS forecasts during the past few months have been negative for both 2017 and 2018.feedback

Mar 13 2017

Two hikes this year would boost bank profits by at least 3 percent. Financials is the sector with the greatest upward EPS revision potential and banks will benefit most.feedback

Mar 06 2017

Among S&P 500 industries, banks and diversified financials display the highest positive correlation with both rising rates and inflation. We recommend investors overweight the financials sector based on our expectation that the Fed will hike three times in 2017. Despite opposing views on financials, banks stocks remain popular across hedge funds and mutual funds.feedback

Mar 06 2017

Our analyses of the newest positioning data show that hedge funds and mutual funds hold opposing views on the financials sector.feedback

Feb 21 2017

Financial market reconciliation lies ahead. We are approaching the point of maximum optimism and the S&P 500 will give back recent gains as investors embrace the reality that tax reform is likely to provide a smaller, later tail wind to corporate earnings than originally expected.feedback

Feb 21 2017

We recommend investors focus on stocks with high secular growth prospects rather than 'winners' and 'losers' from potential tax reform.feedback

Feb 21 2017

On the one hand, investors, corporate managers, and macroeconomic survey data suggest an increase in optimism about future economic growth.feedback

Feb 16 2017 - Trump administration

We expect elevated economic policy uncertainty under the Trump administration will create 'winners' and 'losers' and stock performance increasingly will be driven by idiosyncratic factors, such as sensitivity to wage inflation, margin pressures, and uses of cash.feedback

Feb 09 2017 - Nordstrom vs. Trump

Stocks with the highest effective tax rates will be the clearest beneficiaries of any potential tax reform.feedback

Jan 23 2017

Investor angst is high. One investment strategy that avoids the risk of potential policy pitfalls is to focus on stocks with high secular growth potential. Unsettled' is our best description of fund managers' mindset as the new administration takes office. ... Policy uncertainty was a topic of concern raised in every client meeting. Investor confusion increases when a topic that appears to be gaining political momentum – such as border adjusted tax reform – is suddenly discredited when the president dismisses the idea saying it is 'too complicated,'.feedback

Jan 20 2017

Stocks have surged ... since the election on the prospect of higher earnings under potential Trump policies, but consensus bottom-up 2017 EPS forecasts for S&P 500 have been unchanged. During the quarterly reporting season that ramps up this week, we encourage investors to focus less on actual 4Q results and more on management insights on how firms are positioned on five policy issues that will drive 2017 earnings revisions and share prices.feedback

Jan 10 2017 - Fake news

In the realm of investing, an example of 'fake news' is the claim by some market participants that a 'great rotation' will take place from bonds to stocks. Despite a sharp rise in interest rates during the past six months and a drop in the market value of debt holdings, we expect minimal asset rotation away from debt and into equities during 2017.feedback

Jan 10 2017

Several investor categories have debt allocations that are currently at the lowest level in 30 years. Debt holdings of these investors may decline further, but a more likely outcome is that bond holdings and allocations remain unchanged and debt as a share of the portfolio falls only to the extent equities appreciate.feedback

Jan 03 2017

S&P 500 will rally to 2400 in 1Q 2017 alongside enthusiasm over corporate tax cuts, but budget constraints will limit the magnitude of tax reform and fiscal spending and the index will fade to 2300 by year-end.feedback

Nov 30 2016

Congressional deficit hawks may constrain Mr. Trump's tax reform plans, and the (earnings) boost investors expect may not materialize.feedback

Nov 30 2016

Policy uncertainty introduces a degree of instability to our 2017 forecast that has been absent in recent years. Uncertainty always exists when forecasting, but our projections for next year have more elements of instability than usual.feedback

Nov 29 2016

Health Care Equipment & Services is one of the few slices of the U.S. market that has demonstrated a statistically significant relationship with changes in presidential election odds.feedback

Nov 29 2016 - Affordable Care Act

While near-term drug stocks may benefit from a relief rally, we still expect that drug pricing may remain a bipartisan issue and any changes to Obamacare may be drawn out. New regulations targeting drug pricing and the cost of the Affordable Care Act (ACA) legislation (a/k/a 'Obamacare') will pressure revenues of Pharmaceutical and Biotech firms while increased utilization will continue to benefit Medical Equipment and Services companies.feedback

Nov 21 2016

We expect tax reform legislation under the Trump administration will encourage firms to repatriate $200 billion of overseas cash next year. A significant portion of returning funds will be directed to buybacks based on the pattern of the tax holiday in 2004.feedback

Nov 21 2016

We expect firms will increase cash spending allocated to investing for growth (capex, R&D, and M&A) by 6 percent to $1.3 trillion while cash returned to shareholders (buybacks and dividends) will rise by 19 percent to $1.2 trillion.feedback

Nov 14 2016

Tax and trade reform appear to be high priorities for President elect Trump. Cyclical stocks that should benefit most will have high domestic sales, sizeable profits held overseas that may be repatriated, and/or high corporate tax rates.feedback

Nov 09 2016

Following several years of gridlock inside the Beltway, the potential now exists for a number of legislative initiatives to be passed.feedback

Nov 07 2016

While investors focus on the election, stocks focus on rising wages and expected inflation.feedback

Nov 07 2016

Rising inflation supports the outperformance of cyclical sectors ... over stocks with bond-like qualities [such as consumer staples].feedback

Oct 31 2016

Firms with the most consistently positive EPS revisions from 2011 to 2016 bought back more stock and reduced share count by more than the usual S&P 500 company, expanded margins and had more positive sales revisions than the typical firm.feedback

Oct 17 2016

The candidates would likely look toward corporate tax reform, particularly on untaxed foreign profits, to fund their expansionary fiscal policies. Politicians on both sides of the aisle have advocated for a repatriation holiday, where untaxed foreign profits are taxed at a lower, one-time rate.feedback

Oct 10 2016

We see a weak 3Q reporting season coupled with negative 4Q EPS revisions pushing stocks 2 percent lower to our year-end target of 2,100.feedback

Oct 10 2016

We see a weak 3Q [third quarter] reporting season coupled with negative 4Q EPS [fourth quarter earnings per share] revisions pushing stocks 2% lower to our year-end target of 2100.feedback

Sep 26 2016

We believe the current below-average level of uncertainty is unlikely to persist. Regardless of victor, the most likely policy outcome of the election is increased fiscal spending. We recommend clients vote with their wallets and focus on the likely beneficiaries.feedback

Sep 26 2016

Upcoming debate ranks as the biggest match-up since the Mayweather/Pacquiao bout...viewership may approach Super Bowl proportions with an audience of perhaps 100 million. Both presidential candidates support fiscal spending which should lift aggregate end demand and benefit firms with high government sales exposure.feedback

Sep 22 2016

Low GDP growth and uncertain Fed policy pose risks to cyclical outperformance through year-end.feedback

Sep 19 2016

Based on history, an index-level ROE of 14 pecent implies a P/B of 2.1x, suggesting index downside of 25 percent.feedback

Sep 19 2016

The historical relationship between ROE and P/B shows investors typically penalize falling profitability with lower valuation.feedback

Sep 12 2016

We forecast the S&P 500 will follow a 'fat and flat' trajectory over the next 12 months and finish at 2175, roughly 2 percent above the current level.feedback

Aug 12 2016

Managements expressed concern that consumers will postpone spending due to rising political and economic uncertainty. However, financial firms noted an improvement in household balance sheets.feedback

Jul 22 2016

During the last 10 years, S&P 500 revenues have expanded at an annualized pace of 2.9 percent, nearly the slowest pace in history.feedback

Jul 20 2016 - Japan

We expect U.S. GDP growth of 2 percent and diverging monetary policy regimes between the U.S. and other major global economies will strengthen the USD [U.S. dollar] during the next 12 months. A more hawkish Fed than the market currently expects, coupled with additional monetary easing in Europe and Japan should boost the U.S. dollar by 7 percent during the next 12 months.feedback

Jul 18 2016

S&P 500 stands at an all-time high and the median stock's P/E is at the 99th percentile relative to the past 40 years.feedback

Jul 11 2016

The current U.S. earnings recession will not end in 2Q [second quarter]. Factors like "rising political uncertainty, unstable global growth prospects, and decelerating buybacks" will add to the risk.feedback

Jun 13 2016

Firms with the highest operating leverage will benefit most from improving activity and the associated pickup in sales growth. Operating leverage is highest in Health Care and lowest in Materials and Energy.feedback

May 25 2016

Diversified fund managers who are currently underweight REITs are unlikely to suddenly move to a market weight position in real estate just because the industry group is reclassified as a sector.feedback

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