Displaying items by tag: Goldman Sachs
The housing market has outpaced nearly all expectations as prices are up a staggering 17.7% over the last 12 months. Some bears said this pace has to slow and that simply put there aren’t enough buyers to keep demand boosted this high, but Goldman Sachs sees it differently. They are projecting home prices to grow at 16% over the next year. They believe millennials are just hitting their stride in the buyers market and that a woefully short supply will keep prices elevated. New home construction has been far too sluggish in the post-2008 environment as investors are skittish, but low-interest rates give many the opportunity to buy. All of this puts the U.S. at an estimated 4-million home shortage, which has Goldman extending the horizon for house price growth through 2023, projecting another 6% increase. Others aren’t as bullish; CoreLogic and Freddie Mac are projecting 2.2% and 5.3% respectively.
FINSUM: Extremely low interest rates and glimpses of inflation could prop up home prices for the time being, as excess money has tended to flow disproportionally into assets like real estate.
The debt clock is reading ten minutes to midnight for Congress which seems gridlocked in a game of chicken that could cost the public. Goldman Sachs issued an internal note late last week that there is a material risk that congress fails to reach a consensus on increasing the debt limit. Mitch McConnell is currently reviewing two plans to present Dems that would allow them to reach a consensus on raising the debt ceiling. Treasury Secretary Yellen reiterated that the government will be cash poor to pay the bills if Congress fails to raise the ceiling. Some are calling for the Treasury to mint a $1 trillion coin in order to finance if Congress doesn’t raise the debt ceiling but Goldman says this scenario is unlikely.
FINSUM: Congress always comes around to raise the debt ceiling, but a new wave of Democrats and Republicans pose new risks that a mutual agreement can be met.
There are mixed signals as to how to currently position oneself in the market as news reports are calling many things a good buy, from doubling down on momentum to cyclical value stocks, but Goldman Sachs is bullish on lots of large-cap internet stocks. Amazon, Facebook, Snap, Uber, Lyft, and Expedia all received buy ratings from Goldman’s investment team. They see secular trends in revenue growth and operating efficiencies scaling these companies even larger over the next couple of years. While they don’t consider themselves overly bullish, they see digital advertising being a key lever to push for these companies to have their full upside priced correctly by the wider market. Subscriptions, the creator economy, cloud computing, and augmented reality are all reasons to be fans of large-cap growth, but they are staying away from Airbnb and Twitter. FINSUM: The fed-keeping rates low is very promising for growth companies that are reliant on the credit-frothy economy. But rate moves are also the key risk.
Markets are fretting over a variety of concerns: spreading delta variant, Chinese regulator crackdown, and Fed taper. However, Goldman Sachs says these risks are overblown, as delta variant will likely be less worrisome economically and their Fed forecast is dovish. They see a sharp turnaround for cyclical assets such as higher equities and higher bond yields in the short run. Near-term optimism will fuel US and Euro equities and most likely boost Japanese stocks as well. Going so far as to recommend shorting long-term euro bonds, and buying economically sensitive currencies like the Norwegian krone and South Korean won, which will appreciate relative to the dollar. This near-term cyclical rally won’t last long as they expect 2022 to deal from a different deck that won’t be as friendly to investors.
FINSUM: Weaker jobs growth will also delay the Fed’s taper, aiding in the cyclical rally.
When Schwab announced its acquisition of TD Ameritrade in November 2019, there was a big and sustained surge of consternation among RIAs. TDA had long been known as specializing in RIAs, especially on the smaller end of the spectrum. Schwab had exactly the opposite reputation. That has left a general void for the smaller advisor looking to go independent for the first time. However, Goldman is apparently ramping up its new custody unit and clearing platform for RIAs. The move is still in its early stages, but the firm is hiring several executives to lead the charge and seems to be aiming to compete with Schwab, Fidelity, BNY Mellon etc.
FINSUM: Advisors may recall that Goldman acquired United Capital in 2019. United was an RIA consolidator, so this seems like a natural step for the bank. In our view, it would be great for the industry to have more competition on the custodial front.