“Goldman Sachs Group Inc. said stocks will probably begin a “steady upward trajectory” over the next few years as any declines in economic growth are already reflected in share prices.
“Given current valuations, we think it’s time to say a ‘long good-bye’ to bonds, and embrace the ‘long good buy’ for equities as we expect them to embark on an upward trend over the next few years,” Peter Oppenheimer, chief global equity strategist at Goldman Sachs in London, wrote in a report today.
The prospects for returns in equities versus bonds “are as good as they have been in a generation,” he wrote.
The Stoxx Europe 600 Index (SXXP) is trading at 11.2 times estimated earnings, compared with an average of 11.8 over the past five years, according to data compiled by Bloomberg. The index dropped 11 percent last year as policy makers tried to stop Greece’s sovereign-debt crisis from spreading.
“Periods of sustained falls in the market are typically better times to buy for the long run,” Oppenheimer wrote. “Partly, of course, this is also a function of valuations typically improving after a period of sustained losses in the market. Nonetheless, the key point is that in particularly bad economic periods, once the news is fully priced, investment outcomes tend to improve.”
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