Goldman and BlackRock Sour on Stocks

A global recession probability model by Ned Davis Research recently rose above 98%, triggering a “severe” recession signal. The only other times it has been that high was during previous acute downturns, such as in 2020 and 2008-2009, according to the firm.

The days of the TINA — There Is No Alternative — mantra for stocks are over, the Goldman strategists wrote. While falling yields had burnished the appeal of equities since the global financial crisis, “investors are now facing TARA (There Are Reasonable Alternatives) with bonds appearing more attractive,” they wrote.

“How much yields have moved up, especially real yields at this point, that was very tough to see, this is what’s making us so uncomfortable,” Mueller-Glissmann said on Tuesday in an interview with Bloomberg TV.

“Because 150 bps we haven’t seen for a very long time, that changes the narrative from TINA to TARA,” he said. “You can go to credit to get your nominal yield with relatively little risk, you can go to the TIPS market to get your real yield with relatively little risk, so your incentive to own equities is lower.”

Goldman’s bearish take comes after its U.S. strategists slashed their year-end target for the S&P 500 Index to 3,600 from 4,300 last week. Similarly, Europe strategists including Sharon Bell have reduced targets for regional equity gauges, downgrading their 2023 earnings-per-share growth forecast for the Stoxx Europe 600 Index to -10% from zero.

Both the S&P 500 and Stoxx Europe 600 ended Monday’s session at their lowest levels since December 2020.

“This bear market has not yet reached a trough,” Bell and her colleagues wrote about European stocks in a separate note Monday.