Equities Could Fall Another 25% Goldman Analysts Warn
U.S. equities haven’t bottomed out yet, because they do not reflect the latest rise in Treasury yields and the increasing odds of a recession, according to Goldman Sachs strategists.
“U.S. equity valuations do not yet offer a historically large premium to the real returns on offer from bonds and cash,” wrote Kamakshya Trivedi and other Goldman analysts in a client note dated October 25.
The bearish Goldman caution comes at a time when many traders are looking for a floor in the market, with bullish bond traders hedging for lower yields and a less aggressive Federal Reserve, as they build up long positions in Treasuries.
U.S. equities haven’t bottomed out yet, because they do not reflect the latest rise in Treasury yields and the increasing odds of a recession, according to Goldman Sachs strategists .
“ U.S. equity valuations do not yet offer a historically large premium to the real returns on offer from bonds and cash,” wrote Kamakshya Trivedi and other Goldman analysts in a client note dated October 25.
The markets could face “significant downside if a proper recession occurs or geopolitical risks in Ukraine or elsewhere intensify,” they maintain.
By comparison, Citigroup and JPMorgan Chase market experts believe a recession is already priced into the markets, Bloomberg reports.
The Goldman team believes the S&P 500 Index, trading at 3,847 on Oct. 26, could drop by as much as 25%, to 2,888.
The bearish Goldman caution comes at a time when many traders are looking for a floor in the market, with bullish bond traders hedging for lower yields and a less aggressive Federal Reserve, as they build up long positions in Treasuries.
A Bloomberg survey of Wall Street economists finds 60% expect a recession in the next 12 months, up from 50% a month ago. However, Bloomberg economist Eliza Winger says there is a 100% probability the U.S. will fall into a recession in the coming year.
