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Goldman's Oppenheimer: 10 Percent Market Drop 'Quite Possible'

Goldman's Oppenheimer: 10 Percent Market Drop 'Quite Possible'

(Dollar Photo Club)

By    |   Wednesday, 03 August 2016 08:26 AM

Peter Oppenheimer, chief global equities strategist at Goldman Sachs, warns that a 10 percent drop could soon hit developed market equities.

"I think it's quite possible we could get a move up to around 10 percent lower, we thought for a long time that markets are stuck in what we described as a 'fat and flat' range," he told CNBC, expanding on a research note published by the investment bank on Monday.

"(Stocks are in) a sort of wide but volatile trading range with relatively low returns. And we think we're at the high end of that trading range and moving towards the lower end is quite likely given the rally that we have seen."

The bank downgraded stocks to "underweight" on Monday as part of its three-month asset allocation. Although it remains "neutral" on equities over a 12-month period and continues its "overweight" position in cash, Bloomberg reported.

"There's a price for everything, and the valuations now for equities — admittedly perhaps still cheap relative to bonds —  is looking pretty stretched when you look at absolute multiples," Oppenheimer added on Tuesday.

"There has to be a limit to how far the market can rise from a valuation perspective with weak growth. On the other hand, there's a limit to how much equities can fall as you continue to see yet lower bond yields and more support, or potential for more support from QE (quantitative easing)."

Goldman's experts are far from being alone in their market trepidation.

Bill Gross, a portfolio manager at Janus Capital Group Inc., said  investors should cut risk by placing money in real assets and accept lower returns, given that markets no longer offer double-digit gains in a zero interest-rate environment, Reuters reported.

"Negative returns and principal losses in many asset categories are increasingly possible unless nominal growth rates reach acceptable levels," Gross said in his latest Investment Outlook note published Wednesday.

"I don’t like bonds; I don’t like most stocks; I don’t like private equity. Real assets such as land, gold, and tangible plant and equipment at a discount are favored asset categories," wrote Gross, who runs the $1.5 billion Janus Global Unconstrained Bond Fund.

(Newsmax wire services contributed to this report).

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Peter Oppenheimer, chief global equities strategist at Goldman Sachs, warns that a 10 percent drop could soon hit developed market equities.
goldman, oppenheimer, market, drop
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2016-26-03
Wednesday, 03 August 2016 08:26 AM
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