A top executive at Goldman Sachs believes that bonds are currently more appealing than stocks, as increasing yields and geopolitical uncertainty reshape the market landscape.
Lindsay Rosner, head of multi-sector investing at Goldman Sachs Asset Management, highlighted on the firm’s podcast “The Markets” the recent volatility caused by factors such as the energy shock related to the Iran conflict.
This shock has led to higher yields and prompted a reevaluation of expectations for central bank policies.
Rosner mentioned that the bond market is responding to inflation risks and changing perceptions of the Federal Reserve, as investors are now pricing in fewer rate cuts or even possible hikes.
Despite the uncertainties, she believes that the current market conditions present attractive opportunities in fixed income, especially with rising yields and slightly wider credit spreads.
“When considering the current situation – almost a month into this conflict – I have to ask myself, would I prefer to invest in bonds or stocks? And my answer is bonds. This preference may not come as a surprise given my background as a bond investor, but I aim to be objective.”
“The reason I advocate for bonds is that in the face of potential growth impacts, being higher in the capital structure is advantageous. Bonds hold a superior position to equities and are less dependent on rapid growth.”
“We anticipate that there will still be above-average growth in the US and globally, despite current events. However, bonds offer a secure option, given the increased yields and slightly wider spreads. This combination has generated real yield, expanding opportunities that are worth exploring.”
Rosner also noted that while bonds may not always serve as a reliable hedge during periods of inflation-driven uncertainty, they remain attractive in scenarios where growth slows down and central banks shift towards easing measures.
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