‘High valuations will become a speed limit’: A Goldman Sachs portfolio strategist warns the stock market’s record-setting August is setting traders up for disappointment

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Christian Mueller-Glissmann, a portfolio strategist at Goldman Sachs, told CNBC on Wednesday that markets have been boosted to high valuations with the help of policy support. But he warned that those lofty prices make stocks more vulnerable, and will act as a “speed limit” in the future.

“This is what always happens after a bear market. You get an initial very sharp recovery, and then you get a period where the market actually sees what type of earnings growth you’re really getting,” Mueller-Glissmann said.

He added: “We feel that after this initial explosive recovery in growth, there might be a bit of disappointment for what you get in fundamentals.”


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The strategist explained that the Cboe Volatility Index – or VIX – is signalling that markets will get more bumpy. The VIX is currently moving higher with the market, and “this has historically not been a good signal.” This co-movement also occurred before the drawdown in March, explained Mueller-Glissmann.

However, he also said that the rally in August was underpinned in tactical fundamentals. He said macro data has been “incredibly strong,” and this can tactically support the market higher.

And, while there may be “sharp correction,” policy support is reducing the risk of how deep it can fall, he said.

“I would argue you can have a bit more bumpiness, a bit more fat range, but I would be surprised if we go back into a bear market type situation considering all the policy support,” the strategist said.


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