Global equities are at the upper end of their "fat and flat range," according to Goldman Sachs, who downgraded stocks to "underweight" on Monday as part of its 3-month asset allocation.
The bank remains "neutral" on equities over a 12-month period and continues its "overweight" position in cash. The downgrade comes after a rally in risk assets over the past few weeks driven by the U.K.'s vote to leave the European Union on June 23 and the search for yield amid expectations of easing. But Goldman suggests equities are now expensive and with weaker-than-expected earnings growth it views this as the right time to downgrade.
"Until the growth situation improves, we are not that constructive on equities, particularly after this type of rally and amid continuing concerns about the sustainability of stimulus-led growth in China, global policy uncertainty and in Europe in particular, dovish central bank expectations, and heightened prospects of unknown shocks e.g. Turkey recently," a team of analysts at the bank, led by Christian Mueller-Glissmann, said in a note Monday.