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Goldman Lists 5 Risks to 2014 Call for Higher Bond Ylds, Stocks 2014-01-09 07:30:15.74 GMT
By Max Julius Jan. 9 (Bloomberg) -- Basic market outlook is one in which equities and bond yields can continue to rise together; where DM assets offer better risk-reward than EM counterparts, Goldman Sachs analysts led by economist Dominic Wilson write in client note late yday. * Five “big risks” may affect mapping of Goldman’s macroeconomic views into its market forecasts: * 1) Long-dated real yields rise more sharply than expected * 2) Markets doubt G4 commitments to easy policy amid better growth * 3) Low risk premia create valuation challenges in equities * 4) Corporate margins compress more rapidly as wage share recovers * 5) EM assets benefit more from DM recovery or suffer more from local imbalances * Also see five risks to its macroeconomic base case of rising growth in DM economies, amid low inflation and low policy rates * 1) Reduction in fiscal drag is less of a positive than expected * 2) Deleveraging continues to weigh on private demand * 3) Less effective spare capacity leads to earlier wage/inflation pressure * 4) Euro-area risks resurface * 5) China financial/credit concerns becomes critical
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