Goldman says cash pile will drive equity allocations to new high

Goldman says cash pile will drive equity allocations to new high
Record allocations by households, foreign investors, mutual and pension funds are set to climb even higher in 2022, Goldman strategists led by David Kostin wrote in a note Friday.
OCT 18, 2021

High valuations won’t be a barrier to increased stock allocations next year due to a lack of alternatives and big cash piles, according to Goldman Sachs Group Inc.

Record allocations by households, foreign investors, mutual and pension funds are set to climb even higher in 2022, Goldman strategists led by David Kostin wrote in a note Friday. This belies the argument that stocks have reached unsustainable heights, with Bank of America Corp. recently saying valuations have accelerated to “extremes.”

Goldman’s gung-ho view on stocks comes amid growing expectations that the Federal Reserve will hike interest rates faster and more aggressively starting toward the end of next year. It sees the 10-year Treasury yield rising to 1.8% in 12 months, and expects both investment-grade and high-yield bond spreads to widen — which the bank’s strategists say will make them unappealing to investors. 

Equity allocations, already at an all-time high of 52%, are on the rise because cash yields are near zero and households own half of the $28 trillion of U.S. cash assets, the strategists wrote. 

Goldman expects companies to have $350 billion of net demand for stocks next year due to record buyback authorizations and strong merger-and-acquisition activity. Households and foreign investors will be net buyers of $300 billion, and mutual and pension funds will sell a net $400 billion, it said.

Latest News

SEC to lose Hester Peirce, deepening a commissioner crisis
SEC to lose Hester Peirce, deepening a commissioner crisis

The "Crypto Mom" departure would leave the SEC commission with just two members and no Democratic commissioners on the panel.

Florida B-D, RIA owner pitches bold long-term plan to sell to advisors
Florida B-D, RIA owner pitches bold long-term plan to sell to advisors

IFP Securities’ owner, Bill Hamm, has a long-term plan for the firm and its 279 financial advisors.

Fintech bytes: Vanilla, Wealth.com forge new estate planning partnerships
Fintech bytes: Vanilla, Wealth.com forge new estate planning partnerships

Meanwhile, a Osaic and Envestnet ink a new adaptive wealthtech partnership to better support the firm's 10,000-plus advisors, and RIA-focused VastAdvisor unveils native integrations with leading CRMs.

Fiduciary failure: Ex-advisor who sold practice fined after clients lost millions
Fiduciary failure: Ex-advisor who sold practice fined after clients lost millions

A former Alabama investment advisor and ex-Kestra rep has been permanently barred and penalized after clients he promised to protect got caught in a $2.6 million fraud.

Why the evolution of ETFs is changing the due diligence equation
Why the evolution of ETFs is changing the due diligence equation

As more active strategies get packaged into the ETF wrapper, advisors and investors have to look beyond expense ratios as the benchmark for value.

SPONSORED Are hedge funds the missing ingredient?

Wellington explores how multi strategy hedge funds may enhance diversification

SPONSORED Beyond wealth management: Why the future of advice is becoming more human

As technical expertise becomes increasingly commoditized, advisors who can integrate strategy, relationships, and specialized expertise into a cohesive client experience will define the next era of wealth management