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‘PMs Should Consider Hedging,’ Goldman Says, Amid Signs Of Exuberance
Two weeks ago, Goldman's David Kostin raised his price target for the S&P to 4,500 from 4,000 for 2023.
It was, you might suggest, a mark-to-market exercise. US equities were up 20% from the October lows, ostensibly laying claim to a new bull market thanks almost entirely to a monumental rally in the so-called "Magnificent 7" which comprise nearly 30% of index market cap between them.
Since then, buy-in for the rally has broadened, even as some on the sell-side are reluctant to jump on boa
Time will tell, but I don’t think these short positions will look good as end of the quarter window dressing.
Getting crowded on the equity side of the boat; I’ve been making my way, slowly, over to the bond side.
It will only be with hindsight that we realize that we are in the midst of a paradigm shift away from 60/40 investing for retirement.
With inflation imbedded not only now, but for the foreseeable future, investors have to go further out on the risk spectrum (80/20?- heck, why not 100%- equities?) in order to have enough for retirement. This will affect not only individual investment accounts, but also selections within existing 401-k’s.
Currently, the standard 401-k allocation choice for investing automatically (on an annual basis ) reallocates between equities and bonds based on the estimated remaining number of years until retirement. So for every passing year, the allocation tilts slightly more towards bonds (to preserve capital).
However, this might not work in a higher inflationary environment- when a larger return is needed.
If the standard for 401-k investing moves from 60/40 to 90/10 (eg), over the next few years- how much in additional equities get purchased?
This will happen over time and not overnight.