Goldman Sachs strategist Christian Mueller-Glissmann recommends that investors maintain an overweight position in stocks over the next three months while also viewing bonds as a buy for the next year.
This advice comes amid ongoing volatility in both markets, largely driven by geopolitical tensions in the Middle East that have kept oil prices high, raising concerns about potential interest rate hikes by the Federal Reserve to control inflation.
Despite these challenges, Mueller-Glissmann highlights that earnings growth remains strong, with expectations of nearly 30% growth in third-quarter earnings compared to the previous year, particularly from major companies like UnitedHealth and the largest U.S. banks.
He notes that global equities have been range-bound despite this earnings strength, leading to a significant de-rating alongside rising bond yields. The U.S. 10-year Treasury note and 30-year bond yields recently reached their highest levels since 2002, making longer-dated bonds more appealing.
Goldman Sachs believes that with expectations of inflation normalization and peaking energy prices, bonds are becoming increasingly attractive for long-term investors