Blankfein: US on the ‘Threshold of a Bull Market’

Wednesday, 13 Feb 2013 09:54 AM

By Dan Weil

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The environment for the U.S. economy and stock market is strong, says Lloyd Blankfein, CEO of Goldman Sachs.

“Economic underpinnings are actually better than they have been for some time,” he tells CNBC.

Those underpinnings include low interest rates; a bountiful energy supply, which can boost manufacturing and create jobs; and a rebound in the housing market.

Editor's Note: See the Disturbing Charts: 50% Unemployment, 90% Stock Market Crash, 100% Inflation

“A million things can go wrong, but what people under-assess is things could go right,” Blankfein says. “There are a lot of things that are going right.”

Anticipation of economic strength has helped send stock prices to five-year highs. “The equity market could very well have it right,” he says. “We could be on the threshold of a bull market.”

Presumably he meant an extension of the bull market, given that the Standard & Poor’s 500 Index has soared 128 percent from its March 2009 low.

“The economic underpinnings that we’re facing now … are actually better than it’s been in some time. We’ve chewed through a lot of the problems,” he notes

“Nobody sounds a gun or blows a whistle when things have gotten better.”

Blankfein’s comments came the same day that Goldman Sachs’ analysts downgraded their rating of global stocks to neutral from overweight for the next three months. But they kept an overweight rating for the next year.

While experts like Blankfein are enthusiastic about stocks, companies themselves are less sanguine about their prospects.

Fourth-quarter operating profits climbed a larger-than-expected 7.3 percent for at the first 339 members of the S&P 500 to report their results, according to Thomson Reuters cited by The Wall Street Journal. But analysts’ consensus calls for an earnings increase of only 1.7 percent for the first quarter.

According to The Journal, the level of investor optimism differs from the mood among corporate leaders. As investors pour money into equities, many executives believe the outlook for the global economy and business prospects for this year warrant caution.

Although 17 S&P 500 companies have raised their first-quarter earnings forecasts, 63 have lowered their forecasts, according to data from FactSet Research. That is the largest disparity seen in the seven years that the data has been tracked, The Journal reports.

“Investors are ignoring [companies’] guidance and responding to economic indicators that revenue and earnings will go higher this year,” Edward Yardeni, an independent economist, tells The Journal.

Editor's Note: See the Disturbing Charts: 50% Unemployment, 90% Stock Market Crash, 100% Inflation

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