FILE PHOTO: The ticker symbol and logo for Goldman Sachs is displayed on a screen on the floor at the New York Stock Exchange (NYSE) in New York, U.S., December 18, 2018. REUTERS/Brendan McDermid/File Photo

LONDON (Reuters) – Goldman Sachs said it had upped global equity allocations to “overweight” for the next three months after a recent market pullback, citing an inflection in earnings growth and catch-up moves by cyclical stocks, which had lagged the summer rally.

“A strong recovery in earnings growth (global earnings sentiment is now positive) coupled with a lower cost of equity should drive high single digit returns for global equities over a 12-month horizon,” Golman Sachs analysts wrote in a note issued late on Thursday.

The Wall Street bank cut credit to “neutral”, citing its outperformance during the recent “risk-off” period and tighter spreads, which it said could become a “speed limit” on returns.

On the tech-led Nasdaq correction, the slump “has primarily been a reversal of the summer rally of U.S. Tech stocks,” Goldman added.

Reporting by Thyagaraju Adinarayan; editing by Sujata Rao

Via Reuters Finance

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