The ranks of those predicting difficulties for the stock market and the economy keep getting more crowded.
In recent weeks, we’ve pointed to establishment voices such as the IMF, the BIS, Larry Fink and Paul Tudor Jones as among those warning that the end of this record bull market is near. I’ve said for over a year that investors should lighten up on equity exposure and allocate more to cash in preparation for a slowdown and possible market crash.
Stocks today are almost exactly where they were in early December 2017, so my suggestion had no opportunity cost and would have saved a lot of heartburn as stocks fluctuated wildly up and down in the past year.
In any case, my outlier forecast from late last year now has a lot of company. In addition to the notables mentioned above, Goldman Sachs has now joined the chorus.
This article reports that Goldman is recommending that investors reduce equity exposures and increase cash. Indeed, Goldman says, “Cash will represent a competitive asset class to stocks for the first time in many years.”
Goldman’s main concerns about stocks relate to trade wars and tariffs, something we have also been warning about all year. Goldman likes cash because yields are increasing and stocks look overvalued. This is true, but it overlooks other benefits of cash, including reduced volatility in your portfolio and the ability to pivot quickly into attractive assets if valuations fall as much as Goldman fears.
Goldman has this forecast right. Welcome to the club!
Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.