Displaying items by tag: Goldman Sachs

There is no doubt that government bond and corporate debt markets have taken a beating this year due to inflation and rising interest rates. But that may change next year if two fixed-income strategists are correct. On Tuesday, Gurpreet Gill, macro strategist, global fixed income at Goldman Sachs Asset Management said that “The year ahead is shaping up as the most promising for fixed income in over a decade.” While speaking at the Edelman Smithfield Investor Summit in London, Gill noted that valuations in fixed-income markets were looking more appealing than they were a year ago. This included emerging markets and corporate bonds. She stated, "We think it makes sense to be in high-quality short-duration assets, in agency mortgage-backed securities markets in the U.S." Gill isn’t alone in those thoughts. Sara Devereux, global head of Vanguard Fixed Income Group, said last Friday that “The recent debt rally brought the chance to reduce credit exposure and buy mortgage agency securities based on valuations, setting up what promises to be a bond picker’s paradise in the new year.”

Finsum:Two fixed-income strategists expect next year to be a great year for bond pickers due to lower valuations.

Earlier last week, the SEC and the Commodity Futures Trading Commission disclosed that they levied fines of more than $1.71 billion on several Wall Street firms. The regulators issued penalties to 16 financial companies for the failure to monitor the use of unauthorized messaging apps. The banks that were penalized include some of the largest firms on Wall Street, including Bank of America, Goldman Sachs, Citigroup, Morgan Stanley, Credit Suisse, and Barclays. The SEC’s probe revealed that between January 2018 and September 2021, employees of the aforementioned firms used WhatsApp, personal email, and other unauthorized services on their personal devices to communicate work-related matters. Personal devices can pose risk to an organization's data since it may not be as protected from cyberattacks as a secure company device, which enforces corporate security policies. Making matters worse, the 16 companies also failed to adequately maintain records of the communication, which hindered the investigation. In fact, the firms were not charged for the lax security, but their negligence in the documentation.

Finsum: The SEC and Commodity Futures Trading Commission fined 16 Wall Street firms a combined $1.71 billion for not maintaining documentation on the use of unauthorized messaging apps.

Special purpose acquisition vehicles (Spacs) have been one of the go-to alternatives for high-income investors in the last year, but for Goldman Sachs that could be changing. The SEC is proposing reforms to Spacs in order to improve transparency and align with traditional investments. Goldman will pause their Spac offerings in response. GS was one of the largest underwriters for Spacs in 2021 and raised almost $16 billion. This isn’t expected to be an isolated event for GS, other Wall Street firms are expected to follow suit as regulation will make these less attractive ventures.

Finsum: Biden’s SEC has been a not-so-quiet regulator when it comes to alternatives where they are quickly expanding scope to come down on these sub-industries

Goldman Sachs put out its views on the market’s volatility and how to handle it. The bank is not bullish on markets but thinks there are some very good stocks to help weather the storm. Unsurprisingly, Goldman says investors should buy stable stocks to help get through the turbulence, as such hum-drum stocks look like they have room to run. "Stable stocks also trade with undemanding valuations, supporting the likelihood that they will outperform if the macro environment grows increasingly challenging. Stocks with stable share prices and stable earnings growth generally trade with a valuation premium relative to more volatile peers and to the typical S&P 500 stock. However, relative valuations today are much lower than they have generally been during the last few years."

FINSUM: This is essentially a low-vol, value play, and that makes perfect sense right now. Very stable companies are likely to get through the economic upheaval better than their peers, so on a relative basis they should outperform.

Goldman Sachs released their latest economic forecast and predict the U.S. will grow at its second-highest rate in over 15 years. The 3.1% prediction would only be outpaced by the K-shaped recovery in 2021. Moreover, they said there is a lower risk of a recession in the next year than the rest of Wall Street with about a 15% chance. Attributing much of the inflation to supply chain issues, Goldman seems to be leaning on the latest core PCE inflation numbers that the Fed cares most about which were on the decline. The biggest ongoing risks to the world economy are China and the continuing Russia-Ukraine war.

Finsum: Goldman believes the Fed can thread the needle and hit the soft landing that many say is impossible, time will tell if they can.