Stocks will continue to rally as the bull market in equities moves into a new phase driven by earnings growth rather than expanding valuations, according to strategists at Goldman Sachs Group Inc.
Equities will produce more moderate returns with lower volatility in the second phase of the bull market, according to Peter Oppenheimer, Goldman’s chief global equity strategist, who reiterated his bullish stance on stocks. Oppenheimer said in a March 2012 report that the prospects for returns from equities versus bonds “are as good as they have been in a generation.”
Accommodative monetary policies from central banks have helped extend the bull market in U.S. stocks into a fifth year. The Standard & Poor’s 500 Index has rallied 150 percent since March 2009, driven by three rounds of bond purchases by the Federal Reserve and better-than-forecast earnings by companies. The Stoxx Europe 600 Index has surged 96 percent in the same period, while the MSCI World Index has climbed 123 percent.
“Eighteen months on, we continue to believe the case for equities remains strong, albeit with returns likely to be more muted in the months ahead,” London-based Oppenheimer wrote in a report dated yesterday. “The driver from here is likely to be earnings growth rather than valuation expansion from current levels, consistent with the growth phase of the equity cycle.”
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