It would be rude of Goldman Sachs’ Peter Oppenheimer not to give himself a little wriggle room. From Thursday’s portfolio strategy note to GS clients:
Our economists believe that we are past the low point in the economic cycle, although we are far from expansionary territory. This is one of the signposts we were waiting for before getting more positive on the market and cyclicals. But it does not mean it is the start of a new bull market – it is dangerous to view the current cycle as ‘normal’ given the overlay of the ongoing credit crunch and balance sheet deleveraging. Our strategy is to trade the cycles as they emerge, but be nimble as we may need to make more frequent sector changes than typically following a trough.
Oppenheimer notes that, in terms of magnitude, the recent bear market rally has been much the same as other bear rallies over the past 18 months, as this chart shows:
But with some improving fundamentals and the sheer weight of official policy action, the recent rebound in equity prices simply feels “more substantive.” The strategist accepts that confidence may fade, but believes it unlikely that equity markets will retest February’s lows.
But that doesn’t mean that Goldman are calling the start of a fresh, sustainable bull market! There’s still the Q1 reporting season to come – and the little matter of stress-testing the US banks. Indeed, instead of the usual prolonged straight-line recoveries that have followed bear-market lows in the past, Goldman Sachs see a series of “strong mini-cycles,” as in Japan, in the early 1990s.
So that would be a wwwww-shaped non-recovery, then?
Related links:
BarCap – “The bear market is probably over” – FT Alphaville
Bear market not over – sell today – FT Alphaville