Goldman Sachs: Market valuation highest since 1900

Washington DC, November 30: A prolonged bull market in the US across stocks, bonds and credit in the United States has left a measure of average valuation at the highest since 1900, a condition that at some point is going to translate into pain for investors, according to Goldman Sachs Group Inc.

The US financial market is the most influential market in the world and has effects globally including India. The Indian market is also witnessing an exceptional bull run with markets at an all time high and some of it can be definitely credited to the global markets.

“It has seldom been the case that equities, bonds and credit have been similarly expensive at the same time, only in the Roaring ’20s and the Golden ’50s,” Goldman Sachs International strategists including Christian Mueller-Glissman wrote in a note this week. “All good things must come to an end” and “there will be a bear market, eventually” they said.

The exceptionally low volatility found in the stock market — with the VIX index near the record low it reached in September — could continue. History has featured periods when low volatility lasted more than three years. The current one began in mid-2016.

The experts are saying that the bull run might end soon but investors hope for a prolonged run which can last as long as possible. Valuations have a mixed track record for predicting returns, explaining less than half the variation since 1900.

BY Utsav Saxena with Agency inputs