Goldman Sachs has predicted that cash will soon become a worthy investment as energy companies and tech stocks suffered a sell-off in the US overnight.
An oil price fall as sharp as 7 per cent led to the S&P 500 and Dow Jones industrial average surrendering the gains they had made in 2018.
Both indexes are now more than 1 per cent lower than the start of the year. The Nasdaq also dropped 1.7 per cent – driven by declines for Facebook and Apple – and is now flat on the year to date.
The FTSE 100 and FTSE 250 also saw small falls, with the oil price drop pinned on comments made by US president Donald Trump that America would stand by Saudi Arabia amid accusations of its involvement with the murder of journalist Jamal Khashoggi last month.
In its look to the year ahead published yesterday, Goldman said that while the US equity bull market could continue into 2019, stock prices were still over inflated.
The report reads: “All good things eventually come to an end. Risk is high and the margin of safety is low because stock valuations are elevated compared with history. Cash will represent a competitive asset class to stocks for the first time in many years.
“From a downside perspective, as 2019 progresses, investors will become increasingly concerned about the risk of a recession in 2020.”