The Fed May Not Cut Rates in November. What to Do With Treasury Bonds Now
Goldman Sachs released three heavyweight research reports over the weekend: downgrading the forecast for US recession, expecting the Chinese stock market to rise by another 15% to 20%.
Goldman Sachs' stock strategy team believes that the US large cap stocks can rise by another 4.3% to 6000 points by the end of the year, as the possibility of a US recession has decreased, allowing the Federal Reserve to only reduce interest rates by 25 basis points each time. Their AP strategic team has upgraded the rating of Chinese stocks to "shareholding" and is bullish on the potential boost to valuation from large-scale stimulus measures.
US stocks collectively fell by about 1%, with Chinese concept stocks rebounding in a V-shape, US bond yields rising above 4%, and oil prices rising by nearly 4%.
USA stocks and bonds both fell, with the Dow down 400 points, Tesla down 3.7%, Nvidia up over 2%, Chinese concept stocks fell nearly 3% before closing higher, Alibaba and Tencent ADRs rose 2.6%, Li Auto Inc. rose over 4%. The two-year US treasury yield rose nearly 10 basis points, breaking above 4% for the first time since August for both the 2-year and 10-year treasury yields, with the US dollar hovering at a seven-week high since August 16. Brent crude oil closed above $80, reaching a six-week high along with WTI oil climbing above $77. Silver briefly fell more than 2.4%.
Top Wall Street strategists are more bullish on US stocks, while the big short seller Wilson is more bullish on cyclical stocks. Kostin raised the S&P target.
Morgan Stanley's Mike Wilson believes that cyclical stocks outperform defensive stocks, as the strong non-farm payroll data released last Friday and expectations of further interest rate cuts from the Federal Reserve. Goldman Sachs's David Kostin has raised the S&P's target price for the next 12 months by 5% to 6300 points, equivalent to an increase of over 9.5% compared to last Friday's closing.
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