The stock market rally that’s erased almost all of this year’s losses can’t be justified by corporations’ profit potential, according to Goldman Sachs Group Inc. Chief Executive Officer David Solomon.
“The equity market does seem to be a little bit ahead of my view of the future earnings performance of businesses,” Solomon said Wednesday at the Bloomberg Invest conference. “If I’m right about that, you’ll see a re-balancing of that over time.”
With interest rates around the world at or approaching zero, and central banks vowing to take whatever steps are needed to recover from the COVID-19 pandemic, investors have been pouring money into equities.
It’s “the only game in town” for reasonable long-term returns, Solomon said.
Markets are signaling a rosy outlook about the economy reopening and seem to be discounting the difficulty of living with the virus long-term, the CEO said.