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A golden Goldman call

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by Peter Switzer

What does it mean when one of the greatest investment institutions in history tells their clients that stocks are a buying opportunity of a lifetime and the market heads south?

Well that happened with Goldman Sachs, which has been copping a slagging of late in the press for alleged problems with its approach to clients, coming out arguing that shares are undervalued in the USA after 20 years of poor performance compared to bonds.

Wall Street ended with the Dow 45.57 points or 0.35 per cent lower to 13,124.62 while the S&P 500 lost 2.63 points or 0.19 per cent to 1402.89.

The author of the report was Peter Oppenheimer, who is the boss of equity strategy at Goldman Sachs and this is what he’s predicting is the place to play in coming years.

“Given current valuations, we think it’s time to say a ‘long good bye’ to bonds, and embrace the ‘long good buy’ for equities as we expect them to embark on an upward trend over the next few years,” he wrote in his note to clients.

He says the combined impact of the dotcom bust then the GFC market crash resulted in a mad move into bonds at any old price and has seen stocks “de-rated”. But it’s now turnaround time, according to Goldman.

The report points to stock yields nailing bond yields and I told readers a few months back that this has often been a good reason to pile into stocks.

Of course Oppenheimer acknowledges risks out there such as Europe and the policies that will aim to level the mountain of debt but against this he likes the quality of company balance sheets and the outlook for emerging economies which will bring the global economy a tidal wave of demand.

This is a global growth story and I reckon Goldman, as it has been in the past, will be on the money, at least for a couple of years.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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Published on: Thursday, March 22, 2012

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