BarbaraKollmeyer

Bloomberg

Goldman’s been hashing out its 2015 predictions.

MADRID (MarketWatch) — Next year should be positive for the four big global stock indexes, but it could be a banner year for Asia stocks compared to Wall Street.

That’s the crystal-ball view from Goldman Sachs, in its 2015 outlook for equities, released Thursday. In dollar terms, Asia-Pacific, excluding Japan, is expected to return 11%, while Japan’s TOPIX I0000, +0.89%  is set to return 8%. That’s versus a 5% return for both the S&P 500 SPX, -0.98%  and the Europe Stoxx 600 SXXP, +0.32%

The markets’ climb higher won’t be without a hitch or two, according to Goldman. The S&P 500 is expected to continue an upward path during the first half of 2015, rising 5% to 2,150 midway through, but then fall back to 2,100 by the end of the year as the Federal Reserve is expected to make its first rate hike in six years, and Goldman also sees some deceleration in growth and earnings.

Earnings for the S&P 500 will climb by 5% to $122, while sales will rise by 4% and margins will stabilize at around 9.1%.

Goldman Sachs

For active equity managers, they can expect a tough year ahead, as volatility will remain low. Active managers tend to benefit from high volatility because that’s generally viewed as the best environment for stock picking.

Once rates begin to rise, as anticipated, multiples will compress while volatility and stock-return dispersion will remain low. When dispersion is low, the performance gap between best and worst performers narrows.

“Our forecast of solid U.S. GDP growth (around 3%) underpins our expectations of low volatility, low dispersion and low stock returns in 2015,” said U.S. equity strategist David Kostin and his team.

He’s advising investors stick to three themes when it comes to U.S. stocks:

• Fundamental: Own U.S. stocks with high domestic sales and avoid those with high Europe revenue exposure.
• Income: Own stocks that return cash to shareholders via buybacks and dividends.
• Technical: Buy stocks with low turnover, sell stocks with high turnover.

While Goldman sees a 5% return for the S&P 500 next year, they also see an annualized return of 6% over the next five years. “Starting valuation matters for long-term equity returns,” write Goldman. Risks to that? All the usual suspects: Weaker global economic growth than expected, rising domestic inflation, monetary policy, regulatory uncertainty and geopolitics.

As for sectors, Goldman says information technology will benefit from attractive earnings growth and shareholder returns, with the fastest EPS growth in 2015 of 9%.

They are also overweight energy, which should be supported by current valuation and return to shareholders, even though the plunge in oil prices will be a “gale force headwind for near-term performance.” Goldman is also overweight on telecom services, neutral on financial, health care, consumer staples and utilities. It’s underweight on consumer discretionary, industrials and materials.

— Wally Witkowski contributed to this article