Global stocks start to attract buyers, says Goldman boss
Stocks are getting cheaper as earnings growth forecasts continue to improve
The sell-off in global equity markets, which has wiped out $11 trillion since late March, could be close to bottoming out for now, as battered valuations, particularly among tech stocks, attract buyers.
Some are driven by technical indicators, while others look to solid balance sheets and high dividends. Furthermore, investors have already priced in many concerns, according to Peter Oppenheimer, chief global equity strategist at Goldman Sachs, including inflation and growth, monetary policy tightening and the war in Ukraine.
“Stocks are starting to look attractive to medium to long-term buyers,” he told Bloomberg Television on Tuesday. While downside risks are still lurking, “all this has already been absorbed by the market.”
The S&P 500 is down more than 15% this year, while in Europe, the Stoxx 600 has tested the lows reached after the outbreak of war in Ukraine. The Nasdaq 100 dropped to its lowest level since November 2020 on Monday.
Amid concerns about aggressive central banks, markets may also have felt some relief when Raphael Bostic, chairman of the Atlanta Federal Reserve, said on Monday that he did not support rate hikes of more than 0.5 percentage point.
In Europe, stocks are technically oversold based on the 14-day relative strength index, an indicator that measures the magnitude of recent price changes, while the Nasdaq is also approaching these levels. This analysis worked well for predicting short-term lows over the past year.
Stocks are getting cheaper as earnings growth forecasts continue to improve while prices have plummeted. Europe’s Stoxx 600 now trades at 12 times its future earnings, down from its average price-earnings ratio of 13.2 since 2005. The index has lost 22% this year, a similar valuation drop to the S&P 500.
“We’ve seen a pretty big correction now,” Oppenheimer said. “Inevitably, there are times when you will be able to recover a little bit from the setback.”