Goldman Sachs worries about how quickly market confidence is returning | Real Time Headlines

Market confidence quickly recovers Sharp global sell-off Growth in risk assets should be seen as cause for concern, says head of asset allocation research for risk assets Goldman Sachs.

Goldman Sachs’ Christian Mueller-Glissmann told CNBC’s “Squawk Box Europe” on Wednesday that investors could view the stock market rout in early August as something akin to a “warning shot.” .

The stock market kicked off this month under tremendous pressure. worry On the possible economic recession in the United States and the relaxation of the peoplearbitrage tradeStocks pegged to the yen fell at a record high.

However, since then, expectations for an imminent rate cut by the Federal Reserve and improving U.S. economic data have Drive stock prices soar. Since Aug. 5, the S&P 500 has gained 8%, while the Dow Jones Industrial Average has gained more than 6%.

“Going into this phase, for about a month or two, positioning and sentiment were at the upper end of the range. People were optimistic,” Müller-Glissmann said.

“We’re actually concerned that there’s going to be some correction because at the same time, while you’re bullish, the macro momentum is a little bit weak. In the month and a half before that, there was an unexpected negative impact on the U.S. macro economy, and you’re actually starting to see that Macroeconomic surprises also turned negative in Europe and China,” he added.

“The concern now is how quickly the market returns to previous levels, and we can debate that, but it certainly shows that we’re pretty much back to the same problem we were a month ago.”

This comes after Fed Chairman Powell explain Late last week, “the time for policy adjustment has arrived,” increasing expectations for a rate cut at the central bank’s September 18 meeting. Powell declined to provide a precise description of the timing or magnitude of a rate cut.

When asked what risk appetite will look like in the coming months, Muller-Glissmann responded: “What happened on and around August 5th was clearly a huge technical overreaction…so it’s a buy.” Enter the opportunity.

He said the challenge for market participants now is that stocks and risk assets have “completely reversed” losses and are back to previous levels.

“What I find very interesting is that risk appetite has not returned to previous levels, but what has actually happened is that safe assets – bonds, gold, yen, Swiss franc – have actually It wasn’t sold off.

“I would say the good news is that while the S&P is back to its previous levels, complacency is not. We are no longer in the same extreme bullish mood and positioning.”

Muller-Glissmann previously advocated For the 60/40 portfolio, it was noted that balanced portfolios performed “amazingly” during months of market volatility. However, he warned that the near-term cushion provided by the bond market may not be reliable in the short term.

“If you think about it, the bond market buffers most of the drawdown. If you look at a 60/40 portfolio, it’s just a blip. I think the maximum drawdown for a balanced portfolio in the U.S. or Europe is 2%. So. , in other words, the bond market balances equity, just as we would like,” Müller-Glissmann said.

“I would say, given that you don’t have as much of a bond cushion right now, tactically you probably need to be a little more careful with your risk portion, especially after this run,” he continued.

“There are different ways to deal with this, either pruning it a little bit…or you can create alternative diversification vehicles, which could be liquid alternatives or option coverage, things like that.”

—CNBC’s Lisa Kailai Han and Brian Evans contributed to this report.