Goldman strategist says 2025 equity outlook is complicated by Investing.com

Investing.com – Despite supportive conditions, bond yields face a difficult outlook in 2025 due to three key factors, according to Goldman Sachs strategist.

First, the recent rapid increase in the stock price has already been bought with a lot of good news expected about economic growth. Second, higher rates are expected to reduce future profits. Third, higher market pressure creates more portfolio risks.

Market consumption has increased on several dimensions – geographically, with the US gaining momentum; by sector, with technology driving the majority of equity gains; and by individual stocks.

“The five largest stocks in America account for almost a quarter of the index and almost half of the gains last year,” Peter Oppenheimer, the world’s leading equity expert. is at Goldman Sachs, he said in a report.

Oppenheimer notes that the strong equity rally in recent months has left markets “bought for perfection,” making them vulnerable to corrections. Goldman’s risk appetite index has increased significantly, especially in America, where it is up 23% in 2024 after a 24% gain in 2023.

Most of these gains came later in the year when investors began to react to interest rate cuts. The recent two-year increase in stock prices is at 93% for the same period in the last century.

While interest rates are expected to fall, expectations of a rate cut in the US have weakened in recent months.

Futures linked to the federal funds rate now suggest a 40 basis point cut for 2025, a significant reduction from the 125 basis points expected in September. However, Goldman Sachs economists continue to reduce the rate of projects by a total of 75 points.

Compounding this trend is an increase in bond yields; US 10-year yields rose more than 4.5%, to 100 since September, with similar strong increases seen in markets such as the UK.

Despite these improvements, equity estimates continue to rise.

“The US equity market has the highest value ever – in the last 20 years – and this is still the case if we exclude the largest technology companies,” the report wrote.

Outside the US, equity markets are relatively cheap but most of them are trading near the long-term average, except for China.