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Cohen: Value in volatility
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October 13, 2000: 9:55 a.m. ET
Goldman analyst says stocks reaching good valuation, oil prices will fall
By Staff Writer Catherine Tymkiw
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NEW YORK (CNNfn) - Just one day after the Dow Jones industrial posted its fifth-largest point loss ever, influential Goldman Sachs market strategist Abby Joseph Cohen said the escalating market volatility has not changed the underlying fundamentals.
In a note to clients, Cohen wrote that the fall in stock prices has created attractive equity valuations against the backdrop of a slowing economy.
"Our economic outlook still calls for real GDP (gross domestic product) growth averaging 3-4 percent in coming quarters. We believe that economic and profit expansion can persist for longer at the moderate pace we project," Cohen wrote.
 She also noted that the S&P 500 appears around 15 percent undervalued, improving the valuation picture. "Our valuation work for the S&P 500 has long assumed moderation of profit growth to about 8 percent from 20 percent and a rise in core inflation," Cohen wrote.
The one wildcard hitting Wall Street is the escalating violence ripping through the Middle East and its effect on oil prices, which have been rising. Higher oil prices have sent jitters through the stock market as investors worry about how much a surge in oil prices would cut into corporate profits.
Cohen made calming comments about the oil woes. "The baseline scenario includes expectations that energy prices might spike above the mid-$30s but that such increases would not be long-lasting. Based on sector economies, energy prices are projected to be lower one year from now," she wrote. 
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