Forex Flash: Cyclical patterns not requisite to US equity rally – Goldman Sachs

FXstreet.com (Barcelona) - US equities could continue to rally without strong cyclical leadership, as in the mid-nineties. In particular, if non-US growth remained weak, yields might stay lower for longer. “In that case, despite a US recovery, it is plausible that the S&P 500 multiple could rise further, potentially pushing the index beyond 2000. Our conviction that the US market will climb further is thus higher than our conviction about which sectors lead it there.” suggests the Economics Research Team at Goldman Sachs.

A core element of our market views this year has been that US equities, particularly those with a domestic focus, will perform well. US indices have continued to rally in recent weeks, hitting new highs despite a couple of months in which US and global data have mostly been softer than expected. What has made this more puzzling for many investors is that the rally in stocks has come—at least until the last few weeks—alongside underperformance of some traditional “cyclical” assets, including global cyclical equities and commodities.