Key facts
- Goldman Sachs upgraded its three-month outlook for global equities to overweight from neutral.
- The bank cited supportive earnings growth and more attractive valuations ahead of the third-quarter earnings season.
- Goldman Sachs maintained its overweight stance on Asia and the US.
- The bank remained underweight on Europe.
- Goldman Sachs upgraded its 12-month outlook for government bonds to overweight.
Goldman Sachs on Monday upgraded its three-month outlook on global equities to "overweight" from "neutral," citing supportive earnings growth and more attractive valuations ahead of the third-quarter earnings season. The bank also upgraded its 12-month stance on government bonds to "overweight," believing they will transition from a portfolio headwind to a hedge.
Despite headwinds from Middle East supply concerns boosting oil prices, driving inflation and higher-for-longer rate fears, and a global bond selloff fueled by mounting corporate and sovereign debt, Goldman views the recent pullback in equities as a more attractive entry point. This brings its three-month outlook in line with its bullish 12-month view.
The bank maintained its "overweight" positions in Asia and the US, while remaining "underweight" on Europe. Near-term risks to equities include higher rates and energy prices. Goldman also noted that uncertainty surrounding the US midterm elections could increase market volatility from current low levels.
Goldman favors a "barbell strategy" for equities, favoring tech stocks at one end and bond-like equities at the other. This approach is designed to benefit from potential rate relief and provide a hedge against a tech selloff or intensifying growth concerns.