Goldman says it’s early to call end to equity bulls

Bloomberg

It’s too early to bid farewell to the decade-long equity bull market as stocks are still providing healthy returns for investors, according to Goldman Sachs Group Inc.
“Even with low profit growth the corporate sector has a high free-cash-flow yield and the dividend yield (plus buybacks) ought to still provide a reasonable relative return,” Peter Oppenheimer, Goldman’s chief global equity strategist, said.
The bank’s call comes after Citigroup Inc anticipated a continuation in the strong run of equities and JPMorgan Chase & Co analysts said that the current market correction will be less painful than last December’s rout.
The stock market’s powerful rally was put to test when equities worldwide slumped after weak economic data in the US and Europe fuelled concerns about global growth stalling. Investor sentiment didn’t improve after Bloomberg News reported that Chinese officials are indicating they’re increasingly reluctant to agree to a broad trade deal sought by US President Donald Trump.
A range of indicators including investor positioning before the most recent stock sell-off suggests that the drawdown in the market is about half-finished, according to JPMorgan analysts.
“Entering October, vulnerabilities were moderate rather than high,” John Normand, head of cross-asset fundamental strategy at JPMorgan, wrote in the note.
Traders are also questioning what kind of shares will lead the market in the new environment after September fueled a rare outperformance in so-called cyclical stocks that are more sensitive to the economy. Goldman reiterated its call from last month that the switch away from defensive sectors won’t last.