Goldman Sachs has grown cautious on global equities in the near term. Last week, the investment bank cut its recommendation on equities investments to neutral from overweight over a three-month basis. Analysts said the equity market needs time to digest recent gains and the potential for a strong rally from here is likely to be limited as U.S. equities are already trading above their estimates of current fair value and European equities only have upside to fair value.
“While we have strong conviction in our longer-term view we are more uncertain about the near term. Asset prices have moved a long way and are now very close to our 3-months targets leaving unusually low cross-asset dispersion in our 3-month return expectations,” said Goldman in a note that published February 8.
The investment bank maintains a broader “overweight” rating on equities on a 12-month timeframe, as it expects a gradual pick-up in the global economy over the course of the year to lift equity markets later on in 2013.