Goldman Sees Risk of Stock Decline on Rising Bond Yields – Bloomberg 07-25-14

Salient to Investors:

  • David Kostin, Kathy Matsui, Peter Oppenheimer et al at Goldman Sachs lowered their rating on stocks to neutral and corporate credit to underweight on belief that global equities and bonds may drop in the next 3 months, and stocks may temporarily fall, as rising inflation boosts government bonds and other yields. Goldman said the selloff in equities will be temporary and in line with, but less than, that of last summer because the need for bond yields to correct is lower, and the S&P 500 will end 2014 at 2050. 2015 at 200 and 2016 at 2200.
  • Goldman expects the 10-yr T-yield to rise to 3 percent by the end of 2014 and to 4 percent by the end of 2017 due to strong growth and accelerating inflation in the US.
  • Goldman is bullish on equities longer term, and overweight global stocks on a 12-month basis on earnings driven by sustained economic growth.
  • 47% of financial professionals see equities at close to unsustainable levels, 14% see a bubble.
  • The S&P 500 is at 18 times earnings, 14 percent above its 5-yr average.
  • US GDP is forecast to rise to 3.3 percent in Q2, 1.7 percent for 2014, 3 percent in 2015 and 2016.

Read the full article at http://www.bloomberg.com/news/2014-07-25/goldman-sees-risk-of-stock-decline-on-rising-bond-yields.html

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