Goldman Sachs’ list of overvalued assets vulnerable to re-pricing

US investment bank Goldman Sachs has given out a list of assets which are overvalued according to the bank and might face correction towards its fundamental valuation. The bank feels that credit and FX as asset classes are most vulnerable to re-pricing. However, the bank warns that these calculations are based on purely fundamental perspective, which alone is not always sufficient to trigger selloffs. Below are the lists of assets that are considered as most overvalued.

• Credit: European high-yield bonds, German bunds, Japanese 10-year, Gilts 10-year bonds are most overvalued followed by US high yields, US investment grade, European Investment grade, US 10-year. The biggest risk to the bonds is reflation around the globe, especially in the US and the Eurozone along with an increase in the US treasury yields.
• Stocks: The bank views S&P 500 as the most overvalued equity class, followed by Euro Stoxx 600, MSCI emerging markets, MSCI Asia Pacific excluding Japan, and Topix. Over the past few years, stocks have been supported by cheap credit, fuelling mergers and acquisitions as well as share buybacks. But higher yields clearly threatens that.