Goldman Sachs analysts hope for equity market growth
After a record rally in the U.S. stock market for 30 years, it did collapse in September. The Nasdaq index fell by 5%, Dow Jones collapsed by 2.7%, and the S&P 500 collapsed by 3.5%. The decline caused fluctuations on the trading floors of Asia and Europe, and even touched Russia. However, such a serious drop is not long lasting. In opinion of analysts of investment bank Goldman Sachs, growth of the share market will return, and the bullish trend will recover. In confirmation of their words, experts have identified ten reasons that indicate a positive trend.
Goldman Sachs allocates 4 phases in the stock market. The first one is hope, followed by growth, optimism and despair. For example, in 2019 the segment experienced huge volumes of profitability, which corresponded to the phase of optimism. It replaced the growth phase. Now, according to analysts, there is a phase of hope, which is the beginning of a new cycle. The last one usually falls out during the recession. During this period, investors conduct analysis of the recovery, and its prospects. This phase is the strongest.
The market is in the process of entering a bullish trend, but global processes – a change in monetary policy, a new outbreak of coronavirus – may prevent the market from entering. Experts note that the yield of the new cycle will not be as high as in the past.
In addition, high hopes of analysts are associated with the coronavirus vaccine, at the entry of which in mass production can be expected to increase economic performance. The U.S. is particularly notable for its success in drug development, which has affected market sentiment.
Therefore, we should expect that in the near future the forecasts will be revised towards better performance.
In 2017 Goldman Sachs added an indicator that allows you to analyze what risks are waiting for the bear market. The index in 2019 predicted a decline, taking for calculation six variables. At the moment, the indicator shows low risks for only developing bearish periods.
Due to the monetary policy, the risk for investors in the stock market is low. Usually, after a financial crisis, there is quantitative easing by the regulators. Moreover, the experience of the U.S. and the UK has shown that such a solution can achieve better results in terms of economic recovery. Whereas previously such measures were associated with fiscal tightening, now regulators have decided to do the opposite, and have introduced beneficial programs for support. This suggests that zero rates will last long enough to ensure liquidity.