A Goldman Sachs (NYSE: GS) report released today (Wednesday) forecast a "steady upward trajectory" for the stock market over the next few years, telling investors now is the time to buy stocks - and reject bonds.
"The prospects for future returns in equities relative to bonds are as good as they have been in a generation," Chief Global Equity Strategist Peter Oppenheimer wrote in the Goldman Sachs report, "The Long Good Buy; the Case for Equities." "Given current valuations, we think it's time to say a "long goodbye' to bonds, and embrace the "long good buy' for equities as we expect them to embark on an upward trend over the next few years."
The report's main focus is that when you compare the price and future returns of stocks to bonds, stocks are a much better deal. Inflation concerns are threatening the bull market in bonds, and a Treasury sell-off has pushed up yields.
The 10-year Treasury yield has risen more than 30 basis points (0.3 percentage point) in a week to close to 2.4%. The 10-year Treasury yield hit a record low of 1.67% in September last year.
"We would expect the early rises in bond yields to be positive for equity prices as they both become a reflection of rising growth and inflationary expectations, and could expect some equity re-rating in the initial stages of rising yields," Oppenheimer wrote in the report.
With Goldman Sachs' endorsement to buy stocks, investors following their call could push the market higher than the 12% gains netted already this year.