Goldman: Sell Australia!

See the latest Australian dollar analysis here:

Macro Morning

Via Goldman today comes an ASX downgrade:

“At this point, the relative risk/reward seems to favour fading this outperformance in favor of the north Asian markets.”

“First, valuations have inflated to nearly 16 times forward earnings per share and 2.1 times trailing book, which are the most expensive in the region relative to the 10-year range at 1.2 average z-score.

“Second, the recent dovish tilt by the RBA shows that growth risks lie to the downside and current consensus earnings growth is only low single digit for 2019-20.”

“Since banks account for about a third of the market index, this suggests significant earnings risk against a backdrop of full valuations.”

Goldman also downgraded  the Australian dollar to underweight and sees the RBA cutting o.5% cash rate by year end which will kill earnings for offshore investors (into Australia).

Sell Australia in other words!

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    • One of my investing strategies is to do the opposite of GS press releases of investment bulletins. If they say something it means they are on the other side trading against you should you be suckered in

      • Exactly, which is why this bulletin (which matches my views) makes me uncomfortable.