In a significant shift, Goldman Sachs elevates its global equities rating to “overweight,” citing optimistic economic growth prospects and a rebound in manufacturing activities. This move marks a departure from the initial “neutral” stance across assets at the beginning of the year, highlighting the financial giant’s upbeat outlook.
Recent data revealing improvements in global manufacturing, especially in the United States, contributes to the positive sentiment. Investors now closely monitor incoming economic data to gauge the potential trajectory of interest rate cuts by major central banks.
Goldman anticipates that economic growth will play a more pivotal role in driving risk appetite, emphasizing the likelihood of more negative equity/bond correlations throughout the year. Despite the historical support of monetary policy easing cycles for risky assets, the brokerage suggests a potentially diminished impact this year, given the already factored-in rates relief.
While markets project a 51.3% chance of a 25 basis points interest rate cut by the U.S. Federal Reserve in June, Goldman acknowledges that the scope for global earnings growth remains “relatively muted.” Factors such as declining revenue growth and limited margin improvement contribute to this assessment, but the financial giant recognizes “upside risks” linked to the overall global economic expansion.
Goldman cautions about a potential shift to a ‘good news is bad news’ scenario, expressing concern that equities, despite handling higher bond yields well so far, may face risks in such a transition.
In tandem with the bullish stance on equities, Goldman downgrades global credit assets to “underweight,” citing the likelihood of tight credit spreads acting as a speed limit to returns. The financial giant maintains a “neutral” rating on longer-dated global bonds and commodities.
This strategic move by Goldman Sachs underscores its confidence in the evolving market landscape and the potential for an economic resurgence shaping investment opportunities.
