Goldman Says Global Stock Markets Are Nowhere Near Risky Bubble

While equities across major markets are hovering around record highs, Goldman Sachs Group Inc. strategists say many of the characteristics of a dangerous bubble are absent from global stocks.

Typical signs of systemic risk, such as increased leverage in the private sector and a collapse in savings, aren’t present, the strategists led by Peter Oppenheimer wrote in a report to clients on Monday. Moreover, the rally is unfolding against the backdrop of market concentration in companies that are fast-growing, generate cash and transform their industry, such as major technology businesses, they added.

“There are signs of complacency and heightened optimism in the market,” the Goldman strategists wrote in the 46-page report titled “Bubble Puzzle.” “Nevertheless, the fundamental factors that drive the market and the early stage of the economic cycle would suggest that we are far away from a bubble or bear market.”

European stocks rose last week to their highest in a year, despite prolonged lockdowns and delays in the continent’s vaccination rollout, which could delay a nascent recovery from the steepest recession in memory. In the U.S., the S&P 500 rose to another record high last week.

Still, not everything is fine. The analysts see “pockets of exuberance,” while “high valuations imply lower longer-term returns.”

©2021 Bloomberg L.P.

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