Equities maybe a risky investment amid elevated valuations, elections - Goldman Sachs
Main U.S. indexes edge red
Tech weakest S&P 500 sector; Cons Disc leads gainers
Euro STOXX 600 index down ~0.7%
Dollar ~flat; gold slips; bitcoin off ~1%; crude up
U.S. 10-Year Treasury yield falls to ~4.43%
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EQUITIES MAYBE A RISKY INVESTMENT AMID ELEVATED VALUATIONS, ELECTIONS - GOLDMAN SACHS
Goldman Sachs (GS) says the risks for global equity holders is on the rise as investors have entered the second half of the year in an "unusual environment" with markets reacting to elevated valuations and heightened focus on the upcoming elections.
The end of the first half of the year marks the end of a powerful rally in risk assets that started in October last year, that has taken global equities about 30% higher, a group of Goldman Sachs' strategists led by Peter Oppenheimer said in a note.
A weak labor market, modest pace of interest rate cuts as well as key data like European Purchasing Managers' Index (PMI) and U.S. housing indicate growth momentum has started to slow and is "likely to endure", they note.
The brokerage adds, election concerns in the U.S. and Europe may also hit consumer and business confidence in coming months.
GS said, elevated valuations make equities more vulnerable to disappointments and U.S. equity valuations in particular "have become stretched".
AI fever, coupled with a resilient economy and stronger earnings, have lifted the S&P 500 to fresh records this year following a run of more than 50% from its October 2022 low.
Aside from valuations, the increased concentration of equity markets especially in the tech sector in the U.S. increases risks for investors, they said.
As example they note, recent concerns about AI-capex related surge have surfaced after Micron's fall post results as well as the volatility in Nvidia stocks.
Micron posted a beat in revenue estimates in the third quarter but the chipmaker fell short of lofty analyst expectations.
(Kanchana Chakravarty)
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