Goldman Sachs: If you missed the January rally, you likely missed the 2019 gain

Markets started out the year with a significant bounce. Investors who missed out on it might not get a second chance, according to Goldman Sachs.

The firm is predicting lower returns after the best January in 30 years, and warned that those who missed it risk "missing the bulk of the returns for the year," according to Goldman Sachs analyst Sharon Bell.

"The rally we expected has happened swiftly, and given this we see relatively modest returns on equities from here," Bell said in a note to clients Tuesday.

Markets have rallied after their worst December since the Great Depression. The S&P 500 is up roughly 9 percent for the year so far, and the Dow Jones Industrial Average has rallied 8.7 percent. Bell isn't predict a return to December lows, but is forecasting overall slower growth and lower profits for the remainder of the year.

Earnings in recent weeks have been better than investors feared but estimates are still falling for future quarters. Wall Street expectations for earnings growth for the first quarter of 2019 have now turned negative, which would mark the first decline in more than two years, according to FactSet.

Bell said there is still a slight disconnect between market returns and overall economic performance, but the "over-shot on the downside" that was evident at the beginning of the year isn't nearly as big, Bell said.

"While we saw a bounce in equity markets in 2019, we also argued that this would be followed by the resumption of a 'flat & skinny' trading range, with relatively low equity returns," Bell said.

The "flat and skinny range" will likely be more felt more in Europe, where Bell predicts "very little" earnings growth in the region for 2019 based on high margins, a weak economic backdrop and various structural problems facing large European sectors.

Goldman is forecasting 4 percent earnings growth in 2018, and 2 percent in 2020. Bell said it's difficult to argue for either cyclical or defensive stocks and instead takes an "idiosyncratic approach" to sectors and basket picks.

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