🤯 Have you seen our AI stock pickers’ 2024 results? 84.62%! Grab November’s list now.Pick Stocks with AI

Goldman Sachs stays pro-risk with hedges into year-end

Published 15-10-2024, 04:20 pm
© Reuters.
NDX
-
US500
-
VIX
-

Investing.com -- Following the summer "risk off" period, risky assets quickly rebounded, driven by the Federal Reserve’s dovish shift, China’s stimulus measures, and stronger-than-expected US economic data.

Strategists at Goldman Sachs (NYSE:GS) said Monday their macro outlook remains positive, with healthy US growth and expectations of a global growth recovery next year, supported by central banks cutting rates and further disinflation.

"Fed cutting cycles tend to support risky assets as long as a recession is avoided,” strategists said.

Although the US is exhibiting late-cycle characteristics, Goldman’s team notes that the private sector remains strong, reducing the likelihood of a recession. This, they argue, provides resilience against shocks but also opens the door for potential re-leveraging.

Thus, strategists said they remain pro-risk for the next 12 months, upgrading equities to Overweight and cutting credit to Underweight for the next three months, from Neutral.

“During late-cycle backdrops equities can still deliver attractive returns driven by earnings growth and valuation expansion while credit total returns are usually constrained by tight credit spreads and rising yields,” strategists continued.

"Equities can still offer structural growth opportunities around AI and selective cyclical catch-up opportunities,” they added.

In mid-July, Goldman Sachs shifted to a Neutral stance on equities, from Overweight, and credit from Underweight due to concerns about a potential market correction, as bullish sentiment clashed with slowing growth momentum.

However, global equities have since undergone a round trip and are now roughly flat, strategists said.

Moreover, better US data and policy easing have reduced near-term downside risks. Although the risk of a bear market remains low, volatility could increase due to geopolitical shocks, the US elections, and an evolving growth-inflation mix.

Still, Goldman strategists believe that reducing uncertainty could provide a tailwind for risky assets toward the end of the year, leading them to favor a long position with selective hedges over maintaining a Neutral stance on equities.

The bank’s US strategy team has recently upped their S&P 500 year-end price target to 6,000 and 12-month target to 6,300. They also upgraded their 2025 earnings per share (EPS) forecast to 11% from 6%.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.