Housing’s in freefall. Big Tech is slowing down. Even at Coca-Cola KO,
So of course, the U.S. stock market is starting to rev higher, with the S&P 500 SPX,
Strategists at Goldman Sachs say the move feels premature. “Because we have not decisively met either of the two conditions—convincing inflation relief or a shift towards outright recession—that we think are necessary for a sustained shift, we do not think the pressure for tighter financial conditions is at an end,” they say.
The strategists — Kamakshya Trivedi and Dominic Wilson — say there has been “inching,” in their words, toward both conditions. “So after a sharp tightening, the threshold for some near-term relief is lower,” they said.
But the issue is that inflation news could still disappoint. “If the Fed slowed the pace of hikes and subsequent inflation news disappointed, energy prices moved materially higher or financial conditions eased sharply, they might find themselves pushing back against the market relatively quickly or risking uncomfortable pressure on back-end yields. So unless the inflation news turns convincingly better, we could still find ourselves back in the [financial conditions] loop relatively soon,” they said.
The other big risk is that a severe recession develops. No asset, they say, is priced for a big downturn, though the rates markets and the U.S. dollar are pricing in a greater possibility than the stock market or corporate credit.
The strategists conclude by saying “the broader case for U.S. equities does not look very strong and the normal conditions for an equity trough are not clearly visible yet. Equities have not fully reflected the latest rise in real yields and any significant easing in financial conditions through higher equities will likely be offset by policy in the end.”
U.S. stock futures ES00,
Google parent Alphabet GOOGL,
Facebook parent Meta Platforms META,
The advanced trade in goods report showed a 6% widening in the deficit in September, as well as a 0.8% rise in wholesale inventories and a 0.4% increase in retail inventories. Shortly after the open, new-home sales are due for release.
The U.K. pushed back its fiscal plans to the middle of November on day two of Rishi Sunak’s premiership.
Those on Capitol Hill said it was “painful” to watch Democratic nominee John Fetterman, who had a stroke, debate Mehmet Oz in the pivotal Pennsylvania Senate race.
Just 26 of 193 countries that agreed last year to step up their climate actions have followed through with more ambitious plans.
Russian oligarchs obscure their wealth through a British island.
Here were the most active stock-market tickers as of 6 a.m. Eastern.
A survey finds a third of young adults have been going to horror movies, while Gen X and boomers have said, “Nope.”
The world’s dirtiest man refused to use soap and water for more than half a century. He finally did and died a few months later.
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Goldman Sachs strategists put together a list of companies with high cash burn rates and also lofty valuations
Steven Goldstein is based in London and responsible for MarketWatch’s coverage of financial markets in Europe, with a particular focus on global macro and commodities. Previously, he was Washington bureau chief, directing MarketWatch’s economic, political and regulatory coverage. Follow Steve on Twitter: @MKTWgoldstein.
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