Goldman neutral across assets for 2024, sees chance to move out of cash
Main U.S. indexes red: Nasdaq off ~0.7%
Tech down most among major S&P sectors; healthcare leads gainers
Dollar ~flat; gold up >1%; crude, bitcoin dip
U.S. 10-Year Treasury yield edges down to ~4.41%
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GOLDMAN NEUTRAL ACROSS ASSETS FOR 2024, SEES CHANCE TO MOVE OUT OF CASH
Goldman Sachs says it is neutral on equities, bonds, credit, commodities and cash for 2024, but sees the opportunity to be fully invested after being overweight cash for the past two years.
The rise in bond yields is “making fixed income more attractive,” and the bank shifted to neutral on the asset class after being underweight for almost three years.
But it is focused on diversifying its portfolio “with modest expected returns.”
“We see more value in being balanced again in multi-asset portfolios, with bonds likely to buffer growth shocks owing to continued inflation normalisation. Even without growth shocks, bond yields have likely peaked, and our economists think most central banks will start cutting rates next year, albeit slowly. This should trigger more deployment of cash into bonds and equities with US$8 tn currently in money market funds,” Goldman analysts said in a note on Tuesday.
The bank notes that the fall in bond yields has triggered a strong “bad news is good news” rally in the fourth quarter, and any reversal of this trade could create more opportunities.
“The recent rally increases the risk of disappointment in the near term, either because markets shift to 'bad news is bad news' as growth is too weak, or in the case of renewed rate shocks. This might create opportunities to further deploy cash,” Goldman said.
Commodities will also play a role in the portfolio as “an important diversifier for escalating tensions in the Middle East and European energy crisis risk,” Goldman said. “While rates volatility is likely to ease in 2024, growth volatility and geopolitical risks might keep risky asset volatility elevated.”
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(Terence Gabriel is a Reuters market analyst. The views expressed are his own)</body></html>
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