Goldman Goes Off Stocks

Goldman Goes Off Stocks

almost 4 years ago2 mins

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As the US announces unprecedented borrowing of $3 trillion this quarter alone, several investment experts – including Goldman Sachs – are growing jittery when it comes to the near-term future of global stocks… 😰

What does this mean?

America has already sold lots of debt in recent weeks to fund its extensive coronavirus rescue packages, including over $1 trillion to its own central bank. But the additional borrowing means there’ll be five times as many bonds sold this quarter as there were in the darkest depths of the 2008 financial crisis – and twice as many as in the whole of 2019.

The value of US government bonds held by the Federal Reserve has risen rapidly
The value of US government bonds held by the Federal Reserve has risen rapidly

Despite the heightened supply, investor demand for super-safe US debt remains strong. That may, however, be partly due to growing concerns about parking money anywhere else.

In a new report over the weekend, investment bank Goldman highlighted stocks’ recent rally – but warned that, given the uncertain outlook for economic growth, the rapid return of valuations to February levels looks to be more a product of recent stimulus measures than of stronger potential returns 😬

Financial research firm TS Lombard agrees. In analysis on Monday, it further suggested that the tech giants were largely responsible for the US market’s recovery – and that even these stocks were soon likely to stall...

Only 20% of US stocks are trading above their 200-day moving average
Only 20% of US stocks are trading above their 200-day moving average

Why should I care?

Goldman recommends investors shy away from buying stocks over the next three months, predicting the US S&P 500 index will fall to 2400 – but it’s modestly “overweight” for the next year, foreseeing an eventual rise to 3100. The one constant across both, however, is… cash.

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TS Lombard, for its part, may be even more cautious. It thinks that big banks’ recent earnings – which are more forward-looking than other companies’ – signal tough times ahead wherein firms could fail to repay loans en masse. The real “bear market”, it warns, may be yet to come… 🐻

More granular Goldman forecasts
More granular Goldman forecasts
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