Goldman's wealth strategist sees a buying opportunity in the stock's decline

(Bloomberg) — Stocks are worth buying because they have fallen so much that further dramatic declines are unlikely, according to a top wealth adviser at Goldman Sachs Group Inc.

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The odds of a recession are about 50-50, which the market has already factored into stock prices and potential earnings, Sharmin Mosavar-Rahmani, Goldman’s chief investment officer for wealth management, said on Bloomberg Television’s “Wall Street Week” on Friday.

“Our view is that it has already been reduced a little bit for a recession,” Mosavar-Rahmani told host David Westin. “The stock market usually goes up before earnings bottom, usually by about six months or more. So we shouldn’t really see another big downdraft.”

The S&P 500 plunged 3.4 percent this week — losing nearly 21 percent so far this year — after Federal Reserve Chairman Jerome Powell signaled he plans to keep raising interest rates in his unrelenting war on inflation.

“In general, the stock market tends to recover after such a large downward flow,” Mosavar-Rahmani said. “Does it actually make sense for investors to start getting more aggressive with their portfolios?”

Mossavar-Rahmani remains relatively bullish on the outlook for US stocks. In mid-September, she told Bloomberg that she expects a 45% to 55% chance of a US recession by 2023, and the fall in stocks means that “it’s not enough to make a decision on undervalued stocks when you’re already had such a downward current.’

The S&P 500 sank 9.3% in September and recovered 8% in October.

It’s hard to call a market bottom, so it’s good for investors to start buying steadily after a big decline, Sarah Ketterer, CEO of Causeway Capital Management, told the Westin.

“We’re building up early,” Ketterer said. “We get as much of the stock as low as possible and therefore the average entry price is usually very attractive.”

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