One of Wall Street’s most closely watched equity strategists is sounding an alarm: The stock market is exhibiting some of the same dangerous characteristics it did in the run-up to the Global Financial Crisis, and a correction could be imminent. And warnings from Peter Oppenheimer, Goldman Sachs’ chief global equity strategist, carry particular weight—because his contrarian calls have a strong track record.
In a research note published Wednesday, Oppenheimer warned equity risk premia—a measure of how much extra return investors demand for owning stocks over safer assets—“have fallen sharply and are now, mostly, back to levels seen in the run-up to the financial crisis.” That signal, Oppenheimer wrote, has left equities “more vulnerable to disappointments or shocks” driven by technology competition or a worsening growth-inflation mix.
To be clear, Oppenheimer is not predicting a bear market, but warned the risks of a correction are high. Furthermore, he pointed out, equity valuations are elevated not only in the U.S., which has been true for many years, but every single region around the world shows valuations “above their own longer-term histories.” In other words, stocks are expensive everywhere, and due for a fall.
