Goldman Sachs lifts global equities view to overweight on earnings

what happened

Goldman Sachs on Monday raised its three-month view on global equities from “neutral” to “overweight.” Reuters reports that the bank sees earnings growth continuing to support stocks, while valuations have become more appealing ahead of the earnings season.

Concerns over supplies from the Middle East have pushed oil prices higher, adding to inflation pressures and fears that interest rates will stay elevated for longer. Rising corporate and sovereign debt has also triggered a global bond selloff that unsettled markets in recent weeks. Goldman Sachs nevertheless said the latest pullback had opened a more attractive entry point for equities before third-quarter earnings, bringing its three-month view closer to its bullish 12-month stance.

The bank remains “overweight” on Asia and the US and “underweight” on Europe. It identified higher rates and energy prices as the main near-term risks for equities, while warning that uncertainty over the US midterm elections could lift volatility from current low levels. Goldman Sachs favors a “barbell strategy,” combining technology stocks with bond-like equities. Both could benefit from rate relief, while the latter may offer a hedge if technology shares decline or growth concerns intensify. The bank also upgraded its 12-month view on government bonds to “overweight,” saying: “We believe bonds should gradually move from portfolio headwind to hedge.”

why it matters

The revised allocation reflects a more positive equity stance, but also highlights the market pressure from oil, rates, debt and possible US political uncertainty.

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