By Samuel Indyk
Investing.com – Goldman Sachs’ Wealth Management Chief Investment Officer Sharmin Mossavar-Rahmani has suggested that the United States 10-Year yield increasing to 2% would not be a major catalyst for a downturn in equity markets.
“If the 10-year goes from 1.6% to about 2.0%, we don’t think that is going to hurt the long-term trajectory of equities,” Mossavar-Rahmani said on CNBC’s Squawk Box.
Stay Invested
Mossavar-Rahmani says the company has told clients that the most important message is to stay invested and have a big hurdle to get out the equity market.
“When we are talking about staying invested, we’re talking broadly about the S&P 500. We would not recommend going underweight growth stocks in this environment,” Mossavar-Rahmani added.
What would prompt Goldman to go to underweight?
“If you’re looking at US GDP at 6.5%-7.0%, rates may be increasing but they are not going to be reaching a level that will hurt equities.”
“We estimate that that number is the 10-year at 3.3%-3.4% and we are far from those numbers,” Mossavar-Rahmani said.
Background
The US 10-year yield has jumped from 0.9% in January to a high of 1.75% this month, however, in recent days it has dropped back down towards 1.6%. The jump comes amid rising inflation expectations as the US begins to recover from the pandemic and economies across the globe begin to reopen, leading to fears that the Federal Reserve may have to taper asset purchases and increase interest rates faster than markets are currently pricing in.
With stock levels elevated, partly supported by the fiscal and monetary stimulus measures introduced in the wake of the pandemic, there are fears that when the punchbowl is removed some of the more highly valued sectors may come under selling pressure. During the recent jump in yields, tech stocks have struggled to keep up with the pace of gains in small and mid-caps with the Russell 2000 outperforming the Nasdaq 100 in recent weeks.