Stories
Goldman Upgrades Stocks and Bonds Citing Strong Earnings and Low Recession Risk
- •Goldman Sachs advises investors to be overweight on stocks over the next three months and recommends bonds as a buy over the next year.
- •Strategist Christian Mueller-Glissmann highlights that robust earnings growth supports equities alongside recent valuation de-rating.
- •The corporate earnings season is ramping up with major U.S. banks and UnitedHealth reporting, with FactSet anticipating nearly 30% third-quarter earnings growth.
- •Rising bond yields, which hit their highest levels since 2002, have made longer-dated bonds increasingly attractive for investors with longer horizons.
Key Questions Answered
Goldman Sachs upgraded both asset classes due to strong corporate earnings growth and a low risk of recession. Strategist Christian Mueller-Glissmann noted that supportive earnings and a recent valuation de-rating have improved asymmetry heading into the Q3 earnings season, while longer-dated bonds have become attractive following recent yield spikes.
Analysts expect strong third-quarter results, with FactSet data projecting nearly 30% earnings growth compared to the same period from the previous year. The corporate earnings season features major reports from UnitedHealth and six large U.S. banks including Goldman Sachs and JPMorgan Chase.
Yields on the U.S. 10-year Treasury note and 30-year bond climbed to their highest levels since 2002, with the 10-year yield up more than 60 basis points and the 30-year bond rising 44 basis points since August 25. These market moves made longer-dated bonds much more attractive, prompting Goldman Sachs to upgrade the asset class for investors with longer investment horizons.
