In ‘hope’ phase, enough steam left in market rally: Goldman

The market rally, which started after the March 23 ebb, has still enough room to continue, say analysts at Goldman Sachs, who caution that there could be intermittent corrections along the way.

The markets, Goldman Sachs says, are in the first phase of a new investment cycle, which it calls a ‘hope’ phase, following a deep recession. Investors, it says, start to anticipate a recovery in this phase and is typically the strongest part of the cycle.

“That is what we have been seeing this year. The main triggers for the rebound, in our view, were a combination of slowing infection rates and extraordinary policy support. Financial conditions, which were tightening sharply in the early part of the lockdown, eased rapidly and governments implemented extraordinary fiscal support packages,” wrote London-based Peter Oppenheimer, chief global equity strategist and head of macro research at Goldman Sachs, in a September 7 report.

That apart, Oppenheimer believes, the economic recovery looks more durable as vaccines become more likely. “Our economists have recently made upward revisions to their economic forecasts and it is likely that analysts’ expectations will follow. Our Bear Market Indicator (GSBLBR), which was at very elevated levels in 2019, is pointing to relatively low risks of a bear market despite very high valuations,” he said.

The bear market of 2020 was sharp and short-lived like other event-driven bear markets in the past. The falls, on average, were around 30 per cent in most markets, but the