S&P 500 finishes higher as value stocks outperform
Goldman Sach’s Private Wealth Management team has a simple firm message for its wealthy clients: stick with US equities.
“As we have gone through various crises, we have still told clients to stay invested and not get out of US equities, it’s too early,” said the CIO for Goldman’s Private Wealth Management, which oversees about $500-B and caters to high-net-worth individuals, families and endowments.
“There’s a strong message there, the preponderance of assets in the US at the expense of other developed and emerging-market assets.”
His advice makes her a contrarian amid this year’s record $683-B shovels of cash into bonds as traders searched for havens amid trade-related growth concerns.
In Y 2019 the MSCI World Index posting a 16% return, investors have pulled $349-B from global stocks, exceeding the crisis-hit Y 2008 redemptions by 40%, according to EPFR Global data.
“It’s really remarkable how geopolitical issues have taken so much mind share and dominate what people are doing with their portfolios,” she told reporters in London Tuesday. “It’s incredible to us how money has gone into the worst-performing assets.’
The Global Aggregate Bond Index has returned 28% since September 2009, compared with a total return of 250% for the S&P 500 Index.
Many investors have preferred to stay on the sidelines of this year’s stock rally as they fear that elevated valuations pose a risk at the end of the cycle.
Goldman Wealth Management dismisses the fears as unwarranted.
On the strength of the US economy, the asset manager rate the probability of a recession at just 30% over the next 12 months. And with the S&P 500 trading at a 10% discount to its Y 2017 highs on a forward price-to-earnings basis and equity funds bleeding cash, there is little risk of overcrowding despite the rally, she says.
“There has not been that much overvaluation in equities nor that much hype,” she said. “People do not like US equities. It’s remarkable considering the outperformance. We are nowhere near dotcom bubble levels.”
While bonds can give investors exposure to lower rates, Goldman’s Private Wealth Management recommends being underweight fixed income to fund investments in US equities and other areas.
Tuesday, the major US stock market indexes finished at: DJIA +73.92 at 26909.41, NAS Comp -3.28 at 8084.19, S&P 500 +0.96 at 2979.39
Volume: trade on the NYSE came it at 938-M/shares exchanged
- NAS Comp +21.8% YTD
- S&P 500 +18.9% YTD
- DJIA +15.4% YTD
- Russell 2000 +14.4% YTD
HeffX-LTN’s overall technical outlook for the major US stock market indexes is Neutral to Bullish in here.