Goldman says stocks are at their highest valuation since 1900.
Bonds and Credit are Soaring
But it doesn’t stop there. Bonds and credit are similarly soaring. A convergence that could have dire consequences. As Goldman Sachs International strategists state:
‘It has seldom been the case that equities, bonds and credit have been similarly expensive at the same time, only in the Roaring ’20s and the Golden ’50s…
‘All good things must come to an end…there will be a bear market, eventually,’
Now Goldman believes returns will be lower across all assets in the medium term. Though they aren’t ruling out a scenario that involves ‘fast pain’ either. Especially with the scarily low levels of inflation.
As Bloomberg reports:
‘Low inflation has prevailed in the current period, just as it did alongside economic growth in the 1920s and 1950s, according to the Goldman report. “The worst outcome for 60/40 portfolios is high and rising inflation, which is when both bonds and equities suffer, even outside recessions.” An increase in policy rates triggered by price pressures “remains a key risk for multi-asset portfolios. Duration risk in bond markets is much higher this cycle,” they wrote.’
It looks like the 2020’s might not be ‘roaring’, but they could be memorable, for all the wrong reasons…
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Junior Analyst, Markets & Money