A senior executive at Goldman Sachs says bonds are now more attractive than equities as rising yields and geopolitical uncertainty reshape market dynamics.
On the firm’s “The Markets” podcast, Lindsay Rosner, head of multi-sector investing in Goldman Sachs Asset Management, points to recent volatility driven in part by an energy shock tied to the Iran conflict.
That shock has pushed yields higher and forced markets to reassess expectations for central bank policy.
Rosner said the bond market is reacting to inflation risks and shifting expectations around the Federal Reserve, with investors increasingly pricing in fewer rate cuts or even potential hikes.
Despite that uncertainty, she argus that current conditions are creating compelling opportunities in fixed income, particularly as yields have risen and credit spreads have widened modestly.
“So, when I reflect on what’s happened — we’re almost a month into this conflict — I have to think to myself, what would I rather be, a bond or a stock? And I’d rather be a bond. And maybe that’s not surprising as a bond investor, but I’m trying to be objective.
Why I think you want to be a bond is because, if there’s starting to be impacts on growth, you want to be higher in the capital structure. A bond is above equities for sure and is less predicated on gangbuster growth.
We think there’s still going to be above-trend growth in the US and the world, even with everything that’s happening. But a bond is a good place to be, and we’ve had all of this yield creation because base rates have moved higher and spreads are a little bit wider. That together has created real yield. It’s expanded and it’s interesting right here and I think you should take advantage of it.”
Rosner adds that while bonds have not always acted as a reliable hedge during inflation-driven uncertainty, they remain attractive in scenarios where growth slows and central banks eventually pivot back toward easing.
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