Goldman Sachs Is Bearish On Equities: What Is TINA — And How'd We End Up At TARA?

Along with other large banks, Goldman Sachs Group Inc GS is becoming less bullish on stocks in the near term, saying that markets have not yet factored in the possibility of a worldwide recession.

Over the next three months, Goldman strategists will reduce equity exposure to Underweight while maintaining an Overweight position in cash, citing real rates as the main impediment.

“Current levels of equity valuations may not fully reflect related risks and might have to decline further to reach a market trough,” Goldman strategists wrote in a Monday note.

Goldman’s market-implied recession probability has risen to above 40% following the recent bond sell-off, which historically has indicated elevated equity drawdown risk.

Even though members of the MSCI World Index have lost more than $8 trillion in value since its mid-September peak due to a rise in U.S. yields and the currency, no relief appears to be in the cards.

What is TINA — and how’d we end up at TARA? Recent increases above 98% in a global recession probability model by Ned Davis Research signaled a catastrophic recession.

According to the firm, the only other times it has reached that level were during severe downturns in the past, such as those that occurred in 2020 and 2008–2009.

The days of the TINA — There Is No Alternative — mantra for stocks is over, Goldman wrote. The TINA acronym is often used by investors to justify a lackluster performance by stocks on the grounds that other asset classes offer even worse returns.

Since the global financial crisis, lower yields have enhanced the appeal of stocks, but investors now face TARA (There Are Reasonable Alternatives), with bonds seeming more appealing, Goldman argued.

Goldman's negative outlook follows its U.S. strategists' reduction of their S&P 500 Index year-end forecast from 4,300 to 3,600 last week.

Similar expectations have been lowered by Europe strategists who revised their projection for the Stoxx Europe 600 Index's 2023 earnings-per-share growth to -10% from zero.

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