As equities markets across the globe are giving out mixed signals since the start of the year, professionals are puzzled too. Analysts from Goldman Sachs, JP Morgan and Soros are having diverging views on the direction that the market is heading. Should investors buy, hold or sell now?
After months of bullish sentiments towards European and Japanese equities, Goldman Sachs downgraded these sectors from “Buy” to “Neutral”. Both economies will share the same call as US equities after the latter has been upgraded from “Sell” to “Neutral”. On Asia ex-Japan equities market, it was also given a “Neutral” rating. Analysts from Goldman Sachs feel that there is no reason to hold equities in these markets, citing few sustainable signs of a growth recovery and high valuations as reasons.
The Federal Reserve (Fed) is more dovish than expected from the street, but Fed interest rate is still expected to go up this year. This will lead to further divergence from the other major economies such as Europe and Japan, who are expected to ease their monetary policies further. The strong Euro and Yen, accompanied with negative interest rates, have been weighing companies’ earnings down.
Gradual stabilisation is seen in China as better-than-expected data are coming in. However, risks still remain in the world’s second-largest economy. On the broad view, analysts from Goldman Sachs prefer credit over equities. The main preference is on US High Yield as valuations are less stretched and it offers buffer on higher interest rates.
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