Forex Flash: US equities overweight, accelerating into 2014 – Goldman Sachs

According the Economics Research Team at Goldman Sachs, “We see a solid case for our continued overweight in US equities over 12 months. We expect an improvement in global growth in 2013 and further acceleration in 2014. We forecast earnings growth to accelerate in all regions in 2013.”

Moreover, “valuations remain moderate on a stand-alone basis outside the US and very attractive in all regions when compared with other asset classes. Over 3 months our central scenario is for continued consolidation in equity markets and we are neutral. Markets are trading close to where we would expect them to be given current economic fundamentals, and we only see more upside on a fundamental basis as growth improves later in the year.” they add.

Of course this could be priced early which is the key upside risk to our 3-month forecasts. On the downside the European sovereign situation and the drag on US growth from fiscal consolidation could put near-term pressure on markets. However, given the backstop from the OMT program and the rebound we expect in US growth later in the year we would see any sell-off as an opportunity to add exposure.