Displaying items by tag: Goldman Sachs
Q1 Earnings are starting to roll in for many companies and this presents an opportunity…see the full story on our partner Magnifi’s site
The big inflation-driven bond sell-off has decidedly ended. In fact, bond yields have fallen considerably (with prices rising) over the last few weeks. The gains have prompted some investors to wonder if it is time to jump back into the long-term bond market. Goldman Sachs and Bank of America say an emphatic “no” to that idea. Goldman said the market moves this month have been “Noisy (and potentially temporary)”. They do not believe that yields will continue to fall, only that the chances of a big overshoot of how high they go have diminished.
FINSUM: Yields still seem likely to trend higher, but the market has bought into the idea that the Fed is not going to taper support any time soon, which means the lid is now on long-term yields much more tightly.
The recovery has boosted the junk bond market as investors saw investment-grade bonds and government debt perform…see the full story on our partner Magnifi’s site
The turnaround that energy prices have seen over the last year are simply astounding. This time last year prices were plummeting and there were incredibly dire demand forecasts. Fast forward to the present and you have a very tight supply-demand picture and legitimate talk of the new commodities “supercycle”. With that in mind Goldman has chosen 3 stocks which they say are going to be winners in the new environment: ConocoPhillips (COP), Devon Energy (DVN), and Hess (HES).
FINSUM: Both Devon and Hess are primarily exploration and production companies, which means they are very tied to headline oil prices. Given the tightness of supply, it makes sense they could benefit nicely.
Bonds are incredibly expensive right now, but despite this, they may keep going higher, says Goldman Sachs. The firm is specifically referring to high yield bonds, which are very pricey right now and have low spreads to Treasuries. For example, only 10% of high yield bonds currently trade with spreads above 5 percentage points above Treasuries, compared to 25% in November. This makes Goldman believe the easiest gains are already in the bag, but given that high yield bonds are sensitive to an improving economy and they have appreciated even while Treasuries have fallen, Goldman feels the asset class could be in for more appreciation.
FINSUM: This makes sense. It is also worth noting that historically speaking, high yield bonds have no correlation to the performance of Treasuries.