Goldman Sachs warns of 2 bubbles ready to burst, but isn’t worried By Investing.com


Investing.com – In a note sent to clients yesterday, Goldman Sachs (NYSE ­čÖé bank warned that parts of the market are in bubbles, but argued that they are unlikely to bring with them the downfall of the global market when they burst.

The investment bank notably highlighted the exuberance around PSPCs (companies that are basically blank checks for acquisitions), as well as investor interest in companies with negative earnings as sources of concern.

However, it also considered that a dip in these specific instruments would not represent a risk for the.

“Pockets of the market have recently demonstrated investor behavior consistent with bubble sentiment,” said David Kostin, Goldman’s senior analyst for US equities, stressing that “these excesses pose low systemic risk to the broader market. given their modest share of market capitalization. “

Regarding PSPCs, companies created to raise funds to finance a merger or acquisition within a certain time frame, GS said that “the low interest rates, the flexible structure and the two-year window to find a target before returning the capital suggests that the popularity of PSPC will continue in the short term.

Here again, the bank wants to be reassuring regarding the impact of the bursting of the PSPC bubble on the entire market: “It is important to note that we see little risk for the public equity markets. if the enthusiasm of investors for after-sales service fades “.

Outside of SPACs, Goldman Sachs warned of the popularity of some stocks with negative earnings. The bank points out that over the past 12 months, stocks with negative earnings have performed significantly better than average stocks.

“These companies account for 16% of share trading volumes, exceeding 15% in 2000. While this increase seems unsustainable, it also appears to pose little risk to the broader market as these companies only represent 5%. of total market capitalization, ÔÇŁthe bank explained.

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