Stock Market Overview by Goldman Sachs Analysts!
The US market has been experiencing its heyday since 2000, when the stocks of companies making money on the internet reached their peak and exploded (Dot-com boom). Dot-com companies are still the best game in town according to $ 575 billion wealth management division of Goldman Sachs (NYSE: GS).
Strategists are telling investors to put aside valuation concerns as the S&P 500 hit record levels during the pandemic. All of this in an America where the lowest interest rates and profit increases are faster than almost anywhere.
“When we look at these companies, they haven’t reached the types of valuation that imply a logic-defying scenario. That was the case in the late 1990s,” said Brett Nelson, the group’s head of tactical asset allocation, in a video conference call with reporters on Friday.
This figure is slightly above the provided consensus
Goldman’s wealth management team say they expect the S&P 500 to post a return of around 8 percent with a 26 percent earnings increase this year. This figure is slightly above the provided consensus.
US stocks are currently trading close to their advanced price-earnings levels last seen in 2000. The main difference between the past and the present is the companies with positive free cash flows such as Apple Inc (NASDAQ: AAPL) and Facebook Inc (NASDAQ: FB).
Strategists who support the recovery of the US offer incentives by proposing US priority trade and US stocks of relatively cheaper value and small volume.
Stocks outside the US trade at a discount to the S&P 500. But Goldman strategists say these valuation concerns are no reason to enter stocks in low earning potential, inflated European or emerging markets.
Reflation Trade
Reflation trade (increasing or decreasing the currency in circulation so that it regains its pre-deflation value) is the topic discussed on Wall Street last week after the democrats won the Georgia state elections. This means facilitating the implementation of more aggressive financial measures. However, Goldman disagrees with this view; Democrats’ control over the senate will not guarantee a transition to more aggressive fiscal policies, and they see it as triggering another upward trend for stocks.
Another reason for overweight stocks:
Goldman predicts a negative return on Treasury bonds in 2021, thanks to the global economic recovery, already low rates, and incentive regulations.
Nelson said, “We are predicting negative returns for US Treasury bonds for the first time in the five-year period leading up to the major financial crisis.”
Goldman’s strategists said that the 10-year benchmark returns would increase, it is unlikely to reach a 3 percent tipping point that would tighten financial conditions and hurt stocks.
Stock Market Overview from Goldman Sachs Analysts!
Source: https://www.investing.com/
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