Tags: Goldman | O’Neill | Stock | Buying

Goldman’s O’Neill: Plenty of Stock Buying to Come

Wednesday, 21 March 2012 07:30 AM

A confluence of central bank easing, global growth, and slowness of investors to return to equities means that there is plenty of room for stocks to rise in the months ahead, argues Jim O’Neill, chairman of Goldman Sachs Asset Management.

Global growth is at 4.2 percent, O’Neill estimates, despite the recent slowdown among the BRIC (Brazil, Russia, India, China) countries and other emerging markets.

Meanwhile, bond yields remain low, O’Neill writes to investors in a recent note. Economic growth “means that there continues to be a systematic positive shock to earnings,” O’Neill contends, a trend which “offers equity investors a great return.”

Nevertheless, he writes, many previous stock buyers are sitting it out.

Low volume is a reflection not of lack of conviction, O’Neill asserts, but of a culture change among equity buyers, one that might reverse in time, bringing more cash into the markets to buy stocks.

The U.S. Federal Reserve is unlikely to react to the recent sell-off in Treasurys, O’Neill believes.

“The Fed will keep a strong asymmetry to their policy bias for quite some time until they are convinced that an economic recovery is in place,” he writes. “I believe they are likely to maintain their current stance despite their understanding that ‘payback’ may be required in the future — specifically, the need to really allow rates to ramp up higher at some point.”

Don’t count on central banks to make any moves to take away the punch bowl, warns Marc Faber, publisher of the Gloom, Boom and Doom Report.

"I do not believe that the central banks around the world will ever, and I repeat ever, reduce their balance sheets. They’ve gone the path of money printing and once you choose that path you’re in it, and you have to print more money," Faber tells ChrisMartenson.com, a finance site.

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Wednesday, 21 March 2012 07:30 AM
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