While they acknowledge the challenges associated with the European debt crisis, especially if it continues on for the rest of 2010, and onward, Goldman Sachs (NYSE:GS) remains bullish on the broader market.
Here's how they described the reason for their bullish sentiment:
“We recognize the dramatic decline in the Euro, and the potential impact it may have on reported US corporate earnings if it persists through year-end. We acknowledge the risk that European economic growth may be weaker than many currently expect as a result of pending fiscal tightening. However, we remind equity investors that US companies in the S&P 500 have total annual revenues of $8.4 trillion and Europe, Middle East and Africa combined explicitly account for just 10% of the total (and if charitably inclined, perhaps as much as 15% of the total if a generous allocation of sales to “Other” regions is allocated to Europe).”
I'm not as optimistic as Goldman, and just like their positive outlook for the banking sector, looks a little too strong for the broader market as well.
Even if revenue is close to what Goldman states, many companies have said their growth is going to be based on China, something Goldman didn't comment on.
With the demand from China expected to decline, combined with the austerity pressure in Europe, it looks like the outlook by Goldman may not be as good as they're saying.
It does make me wonder if they're doing this as a gesture to put them in a more positive light or not, as they have to take the global exposure of these companies, and not just selected regions.
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