The recent market wobble has simply enhanced the attractiveness of leading US equities, Goldman Sachs strategist Abby Cohen declared on Wednesday. And anyone who tries to draw parallels between the current process of de-risking and the ugly events of October 1987 should look at the facts.
The ‘87 crash was caused by portfolio insurance, which was found to be structurally faulty. It sought to minimise investors’ losses by automatically reallocating assets when markets fell, but because prices gapped the system failed — resulting in computer-driven orders to sell equities at ever-lower prices.
The current episode of market volatility is still underway and it is too early to carry out a full review of precisely what happened, Cohen says, but she does think its is a good moment to review the likely fundamental backdrop and therefore the attractiveness of equities.
Cohen’s conclusions: