Staff Reporter
As 2025 approaches, global stock markets find themselves in a generally positive environment. However, analysts at Goldman Sachs warn that stocks are currently “priced for perfection,” suggesting a heightened risk of correction.
In a note dated January 9, the analysts pointed out that concerns about rising inflation and interest rates, which fueled fears of a hard landing during much of 2022 and 2023, have largely subsided.
Goldman Sachs maintains its forecast for positive global growth through 2025 and beyond, anticipating lower interest rates. Historically, this combination has been linked to robust equity returns.
Despite a generally positive outlook, Goldman Sachs highlights a complex landscape for equities as 2025 approaches, citing three key factors.
“First, the recent surge in stock prices has already absorbed much of the good news we anticipate regarding growth. Second, high valuations may restrict future returns. Third, unusual market concentration heightens portfolio risks: concentration has increased geographically, with the U.S. becoming more dominant; sector-wise, technology has driven most of the equity returns; and stock-wise, the five largest U.S. stocks now account for about a quarter of the index,” the investment bank stated.
This situation leaves equities “priced for perfection,” particularly evident in the U.S., where the S&P 500 surged 23% in 2024, building on a 24% return in 2023.
“While we expect equity markets to continue progressing throughout the year—primarily driven by earnings—they are increasingly susceptible to corrections due to potential rises in bond yields or disappointments in economic data and earnings,” Goldman Sachs added.
