(New York)

Goldman Sachs has been sending some seriously mixed messages on stocks. Just a few days ago they published a bearish outlook for 2019. Now the bank’s investment management arm is taking the opposite stance, saying that equities are the place to be. Goldman thinks global growth will continue nicely in 2019, giving support to stocks. It does, however, favor emerging markets over developed equities. The bank still thinks US stocks look attractive after the recent selloff, however.

FINSUM: To be honest it annoys us when one institution puts out some many competing views, but then again, each of the divisions has its own interests. We are not as bullish on stocks as Goldman money management arm.

(Los Angeles)

Real estate has been weak for several months now. Even back in the summer when the economy and markets appeared to be humming along, real estate was one of the sore spots for investors and the Fed. Well, the state of the market is becoming more apparent as new numbers from November show that existing home sales feel 7% from last year. The drop is the largest year over year fall since May 2011. Sales have declined in every month in 2018 bar one.

FINSUM: The worsening real estate market is a bit of a conundrum given the state of the labor market. Leading indicator?

(New York)

Retail is in midst of its biggest selloff since the Financial Crisis. Stocks in the sector have not fallen this hard, this fast, since 2008, and that includes the 2017 panic in retail. Retail stocks had been swept up in a sort of cautious optimism this year that had allowed them to see gains. However, they have gotten caught on the wrong side of fears over the economy and trade war, falling a whopping 17% this quarter alone. The big tumble comes despite a quite bullish Christmas sales forecast.

FINSUM: Retail has a lot of problems facing it right now. Outside of the well-known threat of ecommerce, there is also rising labor costs which are pinching margins at the same time as revenue is getting tighter.

(New York)

Goldman Sachs is sending a big warning to the market, but in its own way, of course. The bank’s strategy team has just published a new note telling investors to get “defensive” given the high uncertainty surrounding the market next year. The bank is uncertain about the direction of the stocks, but is leaning towards them either rising or gaining significantly, with a middle ground seeming less likely than usual. Institutional investors are worried that a recession will arrive in 2020, and historically speaking, the market usually falls by more than 10% in the year preceding such a downturn.

FINSUM: That last point raises the interesting question of whether the recession will arrive in 2019 and this is the 10%+ downturn preceding it. That would actually be better than Goldman’s take.

(New York)

In many ways credit markets are a major bellwether for both the economy and the stock market. And right now, they are sending some poor signals. Investors are afraid of rate hikes and money managers are refusing to bankroll buyouts. As a gauge to how brutal the environment is, consider this: not one company has borrowed in the US high yield market this month! A strategist from Janney Montgomery Scott put the current market environment in perspective: “This is clearly more than year-end jitters … What we’re seeing now is pretty typical for end-of-credit-cycle behaviour”. Yields on junk bonds have climbed over 100 basis points since mid-September.

FINSUM: Junk bonds are likely feeling more heat from the worries about a recession and weakening of earnings (in light of high indebtedness) than they are interest rates.