Is it time to buy stocks? Goldman Sachs has upgraded its recommendation for the next three months

Strategists at Goldman Sachs Group have upgraded their outlook for the global stock market over the next three months: they have abandoned their neutral stance and recommended increasing positions. According to them, strong corporate earnings could support stocks, which are already trading near all-time highs, Bloomberg reports.

Goldman Sachs analysts have become more optimistic about the short-term outlook for the global stock market. After rising oil prices and bond yields brought the rally to a halt, stock valuations have become more attractive, and the outlook for quarterly earnings remains favorable, according to a note from the bank’s team of strategists led by Christian Müller-Glissmann.

“Growth in [corporate] earnings remains a solid foundation for stocks, and the recent decline in valuations has improved the risk-reward ratio ahead of the third-quarter earnings season,” the analysts noted.

The stock market is facing a particularly important earnings season, on which much depends regarding whether the rally can be sustained through the end of the year, according to Bloomberg. Analysts, on average, forecast a 25% jump in earnings for S&P 500 companies compared with the same period last year, which would be one of the best historical performances, according to Bloomberg Intelligence. Goldman Sachs strategists expect companies to exceed even this high bar.

They continue to view high interest rates and energy prices as the main threats to the stock market in the near term. The U.S. midterm congressional elections could also increase volatility.

The bank favors the so-called “barbell” strategy: a combination of shares in global technology companies and select stocks—which have fallen in price since the summer—that are sensitive to changes in interest rates.

Strategists recommend buying U.S. and Asian stocks, while advising investors to limit their exposure to European stocks in their portfolios.

Investors are hoping that the third-quarter earnings season, which begins this week, will help the stock market weather the ongoing crisis in the Middle East. According to all forecasts, companies’ financial results are expected to be strong, CNBC reports.

According to John Butters of FactSet, earnings growth for S&P 500 companies in the third quarter is expected to reach 29.6%. If the forecast proves accurate, this will mark the fourth consecutive quarter of growth exceeding 25%, driven by the rapid construction of data centers for AI, the TV channel notes.

However, statements by company executives—regarding how businesses and their customers are coping with rising fuel prices and borrowing costs—will be even more important to investors.

"U.S. stocks are poised to hit new highs this week. Rising interest rates are creating a serious hurdle that most stocks cannot overcome, but strong results from tech companies should keep the major indices on track,” said David Savage, an analyst at Bloomberg Intelligence.

This article was AI-translated and verified by a human editor