S&P 500 Goldman says emphatic No, rates are not a risk to equity valuations


Goldman Sachs Chief US Equity Strategist David Kostin said in his weekly note to clients that inflationary concerns were not a risk to equity valuations. “Investors ask whether the level of rates is becoming a threat to equity valuations. Our answer is an emphatic ‘no,’ Kostin said, according to CNBC.

The weekly Goldman Sachs note says rising yields are not at high enough levels to cause concerns.

Goldman notes the S%P 500 is trading at 22 times forward earnings, which is historically high but the S&P 500 dividend yield versus that of the US 10 year shows less valuation risk with valuations around 42% of historical norms. This the note says should lead investors to identify different sectors which will benefit. 

Equity markets should not be worried until the 10 Year yield hits 2.1%. Kostin notes that the rising yields and growth is in keeping with Goldman's S&P 500 target of 4300 for 2021. “Although secular growth stocks may remain the most appealing investments on a long-term horizon, those stocks will underperform more cyclical firms in the short-term if economic acceleration and inflation continue to lift interest rates.”

Market Reaction

US equities are all strong on Monday with Nasdaq up over 2% and Dow and S&P up 2.1% each.

 

 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Feed news

Get Weekly Crypto trade ideas!  
Empower yourself with the best market insights

Join FXStreet Premium!    

Latest Forex News


Latest Forex News

Editors’ Picks

EUR/USD retreats from 1.20 amid mixed US data

EUR/USD has retreated from its move toward 1.20 as US data is mixed. Building Permits and Housing Starts beat expectations but Consumer Sentiment missed with 86.5 points. Vaccine news is eyed.

EUR/USD News

GBP/USD battles 1.38 as US yields halt their falls

GBP/USD is trading around  1.38, off the highs as US Treasury yields are stabilizing after falling beforehand. US data is mixed. Sterling continues benefiting from Britain's vaccination campaign.

GBP/USD News

Stellar bulls on wrong side of uphill battle

XLM price has erected an ascending parallel channel on the 4-hour chart. A bounce from the setup’s lower trend line, although logical, seems unlikely. Stellar’s bear flag pattern on the 1-hour chart adds weight to the bearish outlook.

Read more

XAU/USD climbs to the highest level since Feb. 25, beyond $1,780

Gold gained strong follow-through traction for the second consecutive session on Friday. The USD struggled to capitalize on its attempted recovery and benefitted the commodity. Rebounding US bond yields, the risk-on mood did little to hinder the positive momentum.

Gold News

Gamestop waits for breakout signal, technical levels to watch

GameStop is struggling for relevance as COIN takes over! GME shares under pressure, down 6% on Thursday. GME is looking for a new CEO according to Reuters.

Read more

Forex MAJORS

Cryptocurrencies

Signatures