The Nasdaq Composite hit a fresh record on Monday, and the S & P 500 is less than 1% below its all-time high. Neither mean investors should let their guard down. Goldman Sachs strategist Christian Mueller-Glissmann highlighted three risks to the market: “A large negative growth shock weighing on risky assets” “Large rate shock weighing on long-duration assets” “A deepening Dollar bear market.” “So far Goldilocks has been escaping the bears – only the Dollar has been somewhat weaker. However, both the risk of growth and rate shocks remains,” London-based Mueller-Glissmann noted. Cracks in the economy have begun to show, particularly in the labor market. The Bureau of Labor Statistics reported last week that the U.S. economy added only 22,000 jobs in August — well below the expected 75,000. And while the market is relieved that the Federal Reserve is likely to ease monetary policy later this month, that could also put upward pressure on inflation — which could then push Treasury yields higher. The 30-year Treasury bond yield briefly touched 5% last week before pulling back recently to 4.714%. As a result, Goldman is bullish on gold, calling for the precious metal to reach $4,000 by mid-2026. Gold on Tuesday hit its own all-time high on Tuesday, above $3,600 per ounce. Goldman is neutral on equities across regions. “One of the marked cross-asset shifts in the summer has been the rally in Gold and a sell-off in longer-dated 30-year bonds across markets, indicating growing concerns on fiscal dominance,” Mueller-Glissmann said. “While the dovish Fed shift due to weaker U.S. data has lowered longer-dated bond yields, larger cuts without a weaker U.S. economy might result in steeper yield curves and higher term premia.” “To hedge stagflation risk into year-end, credit protection looks most attractive,” Goldman said.
