Goldman Sachs: Drop currencies, buy stocks

Goldman Sachs: Drop currencies, buy stocks

30 April 2015, 14:37
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Equity investors should drop all fears regarding strength of global currencies and concentrate on a recovery in economic growth which will push stock markets higher, one of Goldman Sachs' top strategists said.

While speculation of Fed's rate hike had pushed the dollar to records, recent string of soft economic data undermined demand for the greenback. However, major multinationals were left counting the costs of a higher currency and the dent it has made to revenues.

A strong dollar shouldn't play a part in any portfolio decision. Instead, it was having other effects, such as boosting consumption, which was more likely to drive stock markets higher, Peter Oppenheimer, chief global equities strategist at Goldman Sachs, told in an interview with CNBC.

"The counterbalance to (a stronger dollar) is the improvements we are seeing in the labor market and in consumption - the data yesterday was quite positive on consumption. Clearly the stronger dollar is also improving purchasing power," he told CNBC Thursday.

"A lot of headwinds for consumption are moderating. Savings rates are high, disposable income will be improving and consumption is a very big part of the economy."

Although US GDP numbers released Wednesday were far below analysts' expectations, Goldman Sachs remains upbeat on the economy, and Oppenheimer said he expects a "reacceleration" after this "temporary slowdown." Taken along with better data in the euro zone, he said that overall it would be "pretty supportive for global activity."

Soft GDP data weighed on the dollar and sent the euro soaring near a two-month high.

Oppenheimer, however, remained uncompromising that investors should not take into account these currency movements.

"I think that growth is really the most important factor here. That's what's really going to drive profits and dividends and that's really ultimately what equity investors are looking for," he said.

"The effects on the currency mainly via profits, their translation effects...they're relatively moderate. Of course it is helpful to see the euro weakening but I don't think it is essential."

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