Bias Remains to Engage in Markets to Upside

“Our GLI looks to have entered Slowdown phase last month – historically, in this phase of cycle, equities returns are positive but subdued with bias towards “low beta,” less cyclical industries. Weisberger cont’d: Equity performance since the onset of the still nascent Slowdown has been quite vigorous, perhaps influenced by a sharp decline in yields. For example, over the last month the SP 500 is up nearly 5% whereas in a typical Slowdown – which lasts a full seven months – the return is around 3%.

Robust start to Slowdown phase comes after fairly moderate market run during preceding Expansion phase, which lasted from April to September. During that period, equity performance was positive, but not on par with the historical average for the Expansion phase. Just like the tailwind currently is probably rate relief, the headwind then was probably the rate selloff, which also exceeded historical norms for Expansion.

Our bias remains to engage in markets to upside, both in terms of equity risk generally, but also with respect to a positive “growth” impulse, more specifically. Given our forecast for US growth of around 3% in 2014 and beyond, we remain optimistic about equities’ prospects even from current high levels, and are inclined to consider any substantial re-pricing of forward growth views lower a mistake.” (Goldman Sachs)



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