Goldman Tells Investors “It’s Time To Lift Cash Allocations”

Tuesday, November 20, 2018
By Paul Martin

by Tyler Durden
Tue, 11/20/2018

It’s been difficult year for Goldman’s chief equity strategist David Kostin.

On one hand, to your left your have such gloomy analysts as Peter Oppenheimer who two weeks ago said that “things do not look encouraging” as various market signals suggest that “equities could be about to enter a sustained bear market.”

Then, to your right, are “optimistic” economists such as Jan Hatzius, who still expects the Fed to hike 4 times in 2019 in addition to once in December, even as he expects the yield curve to invert in the second half of 2019 and the economy to grind to a crawl, below 2.0% by 2020.

So what do you recommend in your annual equity outlook report when within your own company you have opinions ranging from one extreme to the other, and somehow have to find a way to bridge them?

Well, first you admit that “all good things eventually come to an end” adding cryptically “But when?” Then you launch into some philosophy:

Answering this question represents the fundamental 2019 investment challenge for portfolio managers. For equity investors, risk is high and the margin of safety is low because stock valuations are elevated compared with history. Our baseline assumption is that both economic and profit growth will be positive in 2019 but decelerate from the robust levels of 2018. We forecast the S&P 500 index will generate a modest single-digit absolute return in 2019.

The Rest…HERE

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