Investors have reasons to be optimistic about the longer-term outlook for markets, but policy uncertainty in both the U.S. and Europe are immediate causes for concern, Goldman Sachs' top equity strategist Abby Joseph Cohen told CNBC Tuesday.
Dubbed the “perma-bull” for relentlessly upbeat market assessments that helped her achieve prominence during the bull market of the late 1990s, Cohen also weighed in on a debate stoked by Pimco bond maven Bill Gross, who recently poured cold water on the idea that stocks would continue to return sizeable gains to investors.
The Goldman strategist said that low bond yields were a "concern" given unresolved fiscal issues. Cohen added that equities "will actually generate better returns than fixed income."
Market expectations have been heightened about what the European Central Bank (explain this) will do to resolve the euro zone sovereign debt crisis. (Read More: Markets to Europe Central Bank: Get Germany on Board.)
Cohen suggested that a "fear factor" of a European debt meltdown — as well as the looming "fiscal cliff" and economic weakness in the U.S. — was beginning to retreat from market psychology as stocks continue to rally. Still, investors were right to be worried about near-term policy risks. (Read More: Goldman to Clients: Get Out of Stocks Before ‘Fiscal Cliff’ Hits.)
"This is one of those times while where we are comfortable with the medium-to longer-term outlook, we ... are looking at the shorter-term, and have some concerns primarily about the political situation not just in United States, but in Europe."