From Goldman Sachs' daily look at global markets, in summary:
GS nominate the coronavirus risk along with 6 other global macro risks:
- funding,
- liquidity,
- oil price,
- monetary policy,
- growth risks
- sovereign risks
The bank note recovery has been seen in many since March and April nadirs, with broad improvement in all seven primary risks since April.
Since the middle of May, though:
- US growth views have become a key driver of market outcomes
GS on what is ahead:
- Our forecasts imply that there is still room for market pricing of US growth views to move higher, particularly given improving prospects for an early vaccine.
- We show that as long as improving growth is in the driver's seat, this would likely be consistent with further equity upside even if recent real yield declines were to reverse.
- Our own US growth forecasts, which were upgraded earlier this week, now incorporate a vaccine approval by the end of 2020, and widespread distribution by the end of 2021Q2 as the central case.
- A rise in our growth factor is -all else equal- associated with higher equity returns (a 25 basis point upward shift in growth expectations over the next two years is associated with a 4.5-4.9% lift to the S&P 500), as are lower real yields (a 25 basis point rise in real yields is associated with a 1.2-1.4% drag on equities).
(Bolding above is mine)
