It’s rare there’s a day with the stark contrast we saw yesterday. In the April issue of Retirement Watch, I remarked that I don’t recall see such a sharp divide between those who are optimistic and pessimistic about the stock markets. We saw that clearly yesterday.
First, Goldman Sachs came out with a report arguing that stocks were very cheap and investors should buy them immediately and not worry about the potential for a short-term correction. Goldman argues that stocks are cheap, especially relative to bonds, and that we’re about to enter a period of strong growth.
Second, Albert Edwards of Societe Generale took the opposite position. He’s looking for a repeat of 2011, when the year started off well and then transitioned into a sharp economic and market decline. He’s worried about falling corporate profits, slow growth in China, too much optimism, and other factors.
It’s worth noting that the Goldman report makes a longer-term case, while Edwards is setting policy for the rest of this year. It’s easy to make a case for either extreme. That’s why I’ve been recommending portfolios with true diversification and sell signals under select assets.