Goldman Sachs Favors Equities Over Credit Amid Late-Cycle Risks
Goldman Sachs advises investors to remain overweight in equities over a 12-month horizon, citing sustained earnings growth as a support for stock performance. The investment bank also favors stocks over credit due to late-cycle risks mounting.
In a note to clients, Goldman Sachs strategist Christian Mueller-Glissmann stated that the bank remains tactically neutral across assets for three months and modestly pro-risk for 12 months. He emphasized that bond markets have become a 'speed limit' for equities, with longer-dated bonds under pressure due to fiscal concerns, competition from AI investment, and sticky inflation.
The strategist recommended more style diversification within equities, including low volatility and high dividend yield stocks, alongside gold and real assets. Goldman Sachs continues to prefer equity over credit, citing tight spreads, late-cycle releveraging, and AI-related debt issuance as headwinds for credit markets.