Goldman Sachs Clearly Knows What It is Doing

question mark imposed over the goldman sachs building - logoSo on May 5th, Goldman Sachs came out with a recommendation that investors should add to "U.S. financial and consumer stocks".

At the time, the company increased their weighting on financial companies to "neutral" in relation to the S + P 500, and also increased their weighting for consumer stocks to "overweight". In both cases, Goldman Sachs was advocating that investors increase their exposure to both financial stocks and consumer stocks.

Well, just a month and a half later, Goldman Sachs has come out and said that they were "clearly wrong" about the call. They have also advised their investors to "underweight" the two categories, which means that they are advocating that investors pare down their exposure to both the financial and consumer categories.

The kicker is that investors who followed the company's advice were savaged over the past 1 1/2 months. Financial stocks fell 19% over this period, and consumer discretionary stocks fell 8.4%. This is compared to an overall drop of 6.4% in the S + P 500. As you can clearly see, both of these categories severely underperformed.

How happy would you be if you had followed Goldman Sach's recommendations, only to have them down an about-face just 45 days later?

"Big brokerages" get it wrong ALL the time. The faster you realize that, the faster you will start making money in the stock market.

Source: Bloomberg

Filed under: General Market News

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