Goldman Sachs on Monday warned that the global equity bear market is not over as the markets are yet to see a trough in the momentum of global growth deterioration, a peak in interest rates and valuations lowered to reflect a likely recession.
The Wall Street investment bank expects returns to be a "relatively low" 6% through the end of 2023 as investors focus on the pace of monetary policy tightening and the consequent hit to growth and earnings.
"We continue to think that the near-term path for equity markets is likely to be volatile and down before reaching a final trough in 2023," Goldman Sachs said in a note.
It expects the S&P 500 index to be around the 4,000-points level towards the end of 2023, implying an increase of less than 1% from current levels, as it sees no earning growth.
Goldman expects earnings for the constituents in the Pan-European STOXX 600 index to slide 8% next year, while forecasting a 3% earnings growth for companies in Japan's TOPIX and MSCI's Asia-Pacific ex-Japan indexes.
The investment bank expects investors to start to price in expectations for a bull market next year.
"We expect markets to transition into a 'Hope' phase of the next bull market at some point in 2023, but from a lower level."
(Reporting by Siddarth S in Bengaluru)