Tags: Goldman Sachs | equities | ECB | stocks

Goldman Sachs Turns Bullish on Equities

By    |   Monday, 08 September 2014 11:43 AM

While the rise of the S&P 500 index to a record high Thursday scared off some stock market participants, that's not the case with Goldman Sachs.

"We upgrade equities to overweight over three months," Goldman analysts wrote in a report obtained by CNBC. "We expect earnings growth, dividends and high risk premia to support returns."

On July 25, Goldman downgraded stocks to "neutral" for the next three months, because of concern bonds would tank.

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So what changed Goldman's mind? The major easing steps announced by the European Central Bank (ECB) Thursday, including interest rate cuts and asset-backed securities purchases.

"Following the dovish ECB decisions, we now see the risk to equities from higher bond yields as less imminent," the analysts said.

They predicted that stocks around the world, excluding Japan, will return 3.3 percent during the next three months and 12 percent in the next 12 months.

David Kostin, Goldman's chief U.S. equity strategist, predicted the S&P 500 will reach 2,050 by year-end, up from 2,006 Monday morning.

And how much of your money should you keep in stocks? "Probably a lot more than you think," writes Wall Street Journal columnist Brett Arends. "Long-term returns from equities have beaten alternatives such as cash or bonds."

Andrew Smithers, a London-based financial consultant, concluded in research with London University economics professor Stephen Wright that long-term investors should devote at least 60 percent of their portfolio to stocks, even during bubbles, Arends says.

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While the rise of the S&P 500 index to a record high Thursday scared off some stock market participants, that's not the case with Goldman Sachs.
Goldman Sachs, equities, ECB, stocks
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2014-43-08
Monday, 08 September 2014 11:43 AM
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