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Goldman Sachs: Market Already Hit 'Point of Maximum Optimism'

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Part 2
Goldman Sachs: Market Already Hit 'Point of Maximum Optimism' PART 2 OF 4

Why Goldman Sachs Believes the Treasury Yield Could Rise

Goldman Sachs on Treasury yield

In a recent interview with CNBC, David Kostin, chief US equity strategist at Goldman Sachs (GS), shared his view on bond yields. Since the US election, the yield curve is flattening. It hasn’t shown any significant improvement or decline. A flattening yield is often a warning signal about economic conditions (SPY) (QQQ).

Why Goldman Sachs Believes the Treasury Yield Could Rise

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However, David Kostin believes that the Treasury yield could rise in the near future, as he believes that the Fed might continue its gradual rate hike process. Expectations for rising inflation are also increasing, according to Kostin. If inflation continues to rise, the Fed is likely to continue its rate hike process. Rising interest rates push bond (BND) yields up and bond prices (TLT) (SHY) down.

35-year bond bull market

On the other hand, the bond market has shown a huge rally in the last 35 years. If we look at the ten-year US Treasury yield for the last 35 years, we can see that it’s showing a downward slope. Billionaire investor Bill Miller also said recently that the 35-year bond bull market will see its end.

In the next part of this series, we’ll analyze David Kostin’s view on the financial sector.

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