Equity markets could be stuck in a 'fat and flat' range characterized by weaker returns and greater volatility, according to Goldman Sachs Head of Asset Allocation Christian Mueller-Glissmann.
Mueller-Glissmann highlighted that the key driver of markets in recent months had not been optimism on growth, but rather optimism on inflation, and said there was a "tactical opportunity" for investors in cyclical sectors.
Traders wear masks as they work on the floor of the New York Stock Exchange as the outbreak of the coronavirus disease continues New York, May 27, 2020.Equity markets could be stuck in a "fat and flat" range characterized by weaker returns and greater volatility, according toStock markets have broadly returned to the levels seen before the late-March crash, when the coronavirus pandemic spread across the world.
However, speaking to CNBC Tuesday, Mueller-Glissmann suggested that in recent months, declining bond yields and real yields had boosted equity valuations, meaning flatter returns for investors. "At the same time, you still have very high uncertainty on the growth outlook, both in the near term but also in the long term. And on top of that you have increasing uncertainty on inflation, so in all, that makes us, in the medium term, a bit less excited about risk-adjusted returns for equities," Mueller-Glissmann told CNBC's "Street Signs Europe.
Growth stocks are those of companies with significant and sustainable positive cash flow with greater future earnings and revenue expected to grow faster than that of industry peers, whereas defensive names typically offer stable cash flow and consistent dividends to shareholders regardless of overall market conditions. A value stock is a company trading at a discount relative to the strength of its fundamentals, whether that be a strong balance sheet, sales or dividends.
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