Goldman Sachs Bearish On Bonds And Oil

 

The credit markets will most likely experience a rise in volatility. Next to that, oil prices will return to their lows in the second half of this year. At least, that is what Goldman Sachs expects, which is why the bank is advising its customers to limit their exposure to bonds and oil.

The bond market is dealing with an increasing amount of volatility now that government bonds have been sold off strongly in recent times, pushing rates up. This is the reason why Goldman Sachs analysts have advised their customers to take up a neutral position in the market for bonds and also to stay away from commodities as well for the rest of the year.

Goldman Lowers Bond Outlook

The investment bank lowered its outlook to neutral for bonds. We are talking about the coming 3 months. The bank predicts that the difference between rates on government and corporate bonds will become smaller as well.

Goldman Sachs also lowered its outlook on commodities. The analysts at the investment bank are advising to stay away from commodities altogether in the coming 12 months.

Oil Price Expectation

Analysts from the team of Christian Mueller-Gilissmann explained in a research note that they expect oil prices to go down again first, before a full recovery takes place. The price is relatively high, namely, compared to the current and future fundamentals.

The reaction of the non-OPEC producers remains limited for now. Producers with low cost structures like Saudi Arabia, Iraq, and Russia, are ready to increase their production levels strongly on the other hand.

Goldman Sachs added that, although it is tough to predict the exact timing of the forecasted price drop, the oil price will go to 45 dollars per barrel most likely at first. After that it will recover slowly to 55 dollars per barrel over a period of 12 months.