Goldman: The Biggest Reason Low Yields Can't Boost Stocks Much Higher
Are Complacent Markets Due for a Shock?
Markets have been in an unsustainable "Goldilocks" mode, according to Goldman Sachs Group Inc., in which expectations of rising economic growth combined with sinking bond yields have laid the foundation for a rally in stocks.
But this environment can't hold much longer as acceleration in growth will fail to materialize or come at a cost, accompanied by a rise in government bond yields.
"Like Goldilocks herself, the market might get away with it for a while but it will eventually get caught by a bear," said Chief Global Equity Strategist Peter Oppenheimer. "Either bond yields and interest rates stay at record lows and economic and profit growth disappoints once again (capping valuations), or growth and inflation surprise to the upside (perhaps on the back of more fiscal easing) but bond yields adjust higher (also capping valuations)."