A senior Goldman Sachs executive says bonds are now more attractive than stocks, as rising yields and geopolitical uncertainty reshape market dynamics.
In the firm’s Markets podcast, Lindsay Rosner, head of multi-sector investing at Goldman Sachs Asset Management, notes: Recent fluctuations Partly driven by the energy shock associated with the Iranian conflict.
This shock pushed yields higher and forced markets to reassess expectations about central bank policy.
Rosner said the bond market is reacting to inflation risks and changing expectations about the Federal Reserve, with investors increasingly pricing in smaller interest rate cuts or even potential increases.
Despite this uncertainty, she believes that current conditions create compelling opportunities in fixed income, especially as yields rise and credit spreads expand modestly.
“So, when I think about what happened — it’s been about a month since this struggle — I have to think to myself, what would I rather be, bonds or stocks? And I’d rather be bonds. And that’s probably not surprising as a bond investor, but I try to be objective.”
Why I think you want to be a bond is because if it starts to impact growth, you want to be higher up in the capital structure. Bonds are certainly superior to stocks and are less dependent on explosive growth.
We believe there will still be above-trend growth in the US and globally, even with everything that’s going on. But bonds are a good place to be, and we’ve got all this return because policy rates have gone higher and spreads are a little bit wider. Together this created a real return. It’s been expanded and it’s interesting here and I think you should take advantage of it.
Rosner adds that while bonds have not always served as a reliable hedge during inflation-induced uncertainty, they remain attractive in scenarios where growth slows and central banks eventually ease back toward easing.
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