From ‘There are no alternatives’ to ‘There are reasonable alternatives’ to actions. Thus Goldman Sachs which warns of a change of course in the equity world. The days of the TINA (There Is No Alternative) mantra for stocks are over, Goldman strategists write. “Investors are now facing TARA (There Are Reasonable Alternatives) with bonds looking the most attractive.” “How much yields, particularly real yields, have risen at this point is very difficult to see, and that’s what makes us uncomfortable,” said Christian Mueller-Glissmann, Senior Equity Portfolio Strategist at Goldman Sachs, in an interview. to Bloomberg TV.
Markets have yet to assess the risk of a global recession. From here, Both Goldman Sachs and BlackRock are short-term bearish on equities. In detail, Goldman analysts are underweight the global allocation for the next three months, while overweighting liquidity. BlackRock advises investors to “avoid most stocks,” adding that they tactically underweight developed market equities and prefer short-term credit.
“Current stock valuation levels may not fully reflect related risks and may have to decline further,” Goldman strategists including Christian Mueller-Glissmann wrote in a statement. The likelihood of recession, according to Goldman, rose above 40% following the recent bond sell-off, “which has historically indicated a high downside risk in equities,” they wrote. Similar concerns were also voiced by Morgan Stanley and JPMorgan Asset Management after central bankers, from the US to Europe, stressed their determination to fight inflation, sending global stocks into free fall in recent days. Little respite is on the way, even as members of the MSCI World index have lost more than $ 8 trillion in value since the mid-September peak.
We do not see a “soft landing”, with inflation quickly returning to target without crushing activity, say strategists at the BlackRock Investment Institute, including Jean Boivin and Wei Li. “This means greater volatility and pressure on risk assets.”
The global recession probability model developed by Ned Davis Research recently exceeded 98%, triggering a signal of “severe” recession. The only time it has been this high was in previous acute crises, such as those of 2020 and 2008-2009.