Goldman Sachs say U.S. equity valuations look expensive on most metrics and urge companies to stop buying back their own stock at such high prices
Say that:
- The current price to earnings (P/E) expansion phase has lasted 43 months
- Will likely end when the Fed starts raising interest rates (GS expects this to start in September)
GS go on:
- The last time buybacks were this high was in 2007
- Just before stocks plummeted during the financial crisis
So, on buybacks, GS says to just say no:
Exhibiting poor market timing, buybacks peaked in 2007 (34% of cash spent) and troughed in 2009 (13%). Firms should focus on M&A rather than pursue buybacks at a time when P/E multiples are so high.