Goldman Sachs says there's a window of opportunity for stocks right now as investors are worrying too much about the Delta variant
- Goldman Sachs said there's a window of opportunity for stocks, as the market is too worried about the Delta variant.
- The Wall Street bank said cyclical stocks should benefit in particular as the economic recovery continues.
- Yet it also said that the economic picture would become more cloudy in 2022 as the boost from stimulus fades.
Goldman Sachs has said investors are too worried about the risks from the Delta coronavirus variant, arguing there's a window of opportunity for solid stock-market gains before the effects of stimulus die down.
Some investors have been jittery in recent months about the rapid spread of COVID-19 in advanced economies such as the US, which has caused many institutions to downgrade their economic growth forecasts.
Yet Goldman analysts, led by Zach Pandl, said in their global outlook that they believe those fears as overblown.
"Despite this, we think the market is worrying too much about global cyclical risks from Delta outbreaks and China's slowdown, and our [Federal Reserve] forecast is still more dovish than the market's," they said in a note on Wednesday.
"So we think some further relief in cyclical assets - higher equities and higher bond yields - is likely over the near-term."
Cyclical stocks are those that tend to do better when the economy is strong, such as shares in hospitality and retail companies, or banks.
The analysts said the economic outlook over the next few months should be stronger than people anticipate, allowing the market to relax and creating a "window of opportunity" for stocks to rise.
Goldman expects the S&P 500 - the benchmark US stock index - to rise to 4,550 over the next three months and climb to 4,700 in six months. The index closed at 4,524.09 on Wednesday.
The Wall Street bank's analysts said they expect the highly transmissible Delta variant to have less of an impact in countries that have plenty of vaccines than the market is currently pricing in. They also said the US labor market should remain strong as the economy reopens.
However, Pandl and the team said they expect the environment for stocks to become more challenging over the medium term.
"Our economists estimate that the combined impulse from fiscal stimulus, reopening, and pent-up savings to global GDP growth will be greatest in Q3 2021 and smaller thereafter, turning slightly negative by H2 2022, reflecting the reduction in fiscal support and a shrinking reopening boost."