Skip to main content

The Globe and Mail

No bubble in U.S. stock market, says Goldman’s Cohen

The Goldman Sachs logo is displayed on a post above the floor of the New York Stock Exchange, September 11, 2013.


The U.S. stock market isn't overpriced and has more room to run, according to Abby Joseph Cohen, president of Goldman Sachs Group Inc.'s Global Market Institute.

For all the chatter about S&P 500 Index valuations that are stretched too thin, stocks are fairly priced when you take into account Goldman's earnings outlooks and the general strength of U.S. companies at home and abroad, Ms. Cohen said in an interview on Bloomberg Radio with Tom Keene and Michael McKee on Wednesday.

"We're also now seeing real gains in our labor market," she said. "Growth is actually better here than in many other countries."

Story continues below advertisement

Volatility has flared up in the financial markets again, as central banks signal they're rethinking their approach to stimulus and investors question equity valuations. The S&P 500 trades at more than 18 times estimated earnings, the highest since 2009, and for stocks to hit forecasts for next year they'd have to increase profits by 13 per cent, something that hasn't happened since 2011.

The benchmark index will see earnings growth of 9 to 10 per cent this year, Ms. Cohen said last month in a Bloomberg Radio interview. That compares with an estimated contraction of 0.4 per cent among analysts surveyed by Bloomberg.

Markets in many other places look expensive compared to the U.S, especially when taking into consideration improvements in the U.S. labor market, Ms. Cohen said. Indeed, an MSCI index of equities outside the U.S. trades at a valuation gap to the S&P 500 Index that is close to the biggest since the start of the bull market.

"If we're correct that there's not a recession," Ms. Cohen said, "we expect U.S. stocks prices to move higher, not in a straight line, but to drift up."

Report an error
As of December 20, 2017, we have temporarily removed commenting from our articles. We hope to have this resolved by the end of January 2018. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to If you want to write a letter to the editor, please forward to