Don't expect significant stock market gains in 2019, says Goldman's Oppenheimer

  • Improving market sentiment since the beginning of 2019 has helped the Dow Jones Industrial Average jump more than 7 percent, with the pan-European Stoxx 600 also climbing over 6 percent.
  • "It's worth noting that we expect pretty weak profit growth across all major regions this year," Goldman Sachs' Peter Oppenheimer told CNBC on Friday.
  • When asked whether investors had seen most, if not all, of their stock market gains already this year, Oppenheimer replied: "Largely, I think, yes."

Investors hoping for big returns from financial markets this year are going to have to dial back their expectations, according to the chief global equity strategist at Goldman Sachs.

A stock market rebound at the beginning of 2019 comes after a period of gloomy market sentiment in the final three months of last year.

U.S.-China trade tensions, Brexit uncertainty and fears about global growth intensified at the end of 2018, prompting U.S. stocks to register their worst December since the Great Depression.

However, improving market sentiment since the beginning of 2019 has helped the Dow Jones Industrial Average jump more than 7 percent, with the pan-European Stoxx 600 also climbing over 6 percent.

"European stock markets have enjoyed a rally over the course of this year to date just as most others have as well. But, fundamentally — that said — we do think profit growth is going to be pretty weak this year," Goldman Sachs' Peter Oppenheimer told CNBC on Friday.

"It's worth noting that we expect pretty weak profit growth across all major regions this year… That's where we get this idea of a sort of skinny and flat market, relatively low returns in a reasonably narrow trading range," he added.

'Modest profit growth'

At the start of the year, economists at Goldman Sachs argued financial markets had overpriced the risk of a global recession.

As a result, valuations had fallen too far, Oppenheimer said.

The U.S. investment bank also predicted that as inflation risks started to moderate over the first few weeks of 2019, market participants would have needed to make sure they were already invested in equities to avoid missing out on potential returns.

When asked whether investors had seen most, if not all, of their stock market gains already this year, Oppenheimer replied: "Largely, I think, yes."

Traders work on the floor of the New York Stock Exchange.
Brendan McDermid | Reuters
Traders work on the floor of the New York Stock Exchange.

"Backed by relatively modest profit growth, we would see reasonably small increases in price returns from here," Oppenheimer said.

His comments come amid intensifying concerns about a broadening global economic slowdown.

On Thursday, President Donald Trump said he did not plan to meet with Chinese President Xi Jinping before a March 1 deadline to reach a deal.

Trump's stance rattled investors hoping for a positive resolution to a long-running trade dispute between the world's two largest economies.

Meanwhile, the European Commission sharply downgraded its forecast for euro zone economic growth in 2019 and 2020 in on Thursday. The news exacerbated fears that a global economic downturn is spreading to Europe.