Goldman Sachs: Equity rally needs dovish monetary surprise
In its note tracking Europe vs. US divergence, Goldman Sachs analysts warn that a dovish surprise from central banks is needed to sustain the current equity rally.
"Our European strategists have shown that activity data is the most important driver for equity performance and that central bank cuts generally help further," the note states. However, despite positive European data, European equities haven't responded as strongly. They add:"In fact, hawkish surprises due to stubborn inflation increase the risk of ‘good’ macro news becoming ‘bad’ news for markets."
To support the equity rally, Goldman Sachs believes a dovish pivot from the Federal Reserve is crucial. They point to"low-risk premia in both equities and credit" as factors that heighten the importance of a dovish Fed stance.Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors.
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