Goldman Sachs: Before the Fed cuts interest rates, it is recommended to long the South Korean stock market and short the Brazilian stock market
Against the backdrop of the Federal Reserve's upcoming rate cut, Goldman Sachs is bullish on the stock markets of South Korea, South Africa, and India. They recommend investors to long the Korean Kospi index and short the Brazilian Ibovespa index. Although the Brazilian stock market is approaching historical highs, anticipated rate hikes and weak demand may pose pressure on it. Moreover, the long-short ratio between Kospi and Ibovespa is close to a 5-year low, providing a good entry opportunity
Goldman Sachs stated that against the backdrop of the Federal Reserve's upcoming interest rate cuts, they are optimistic about the stock markets in South Korea, South Africa, and India. These countries have steady profit growth and may soon begin to relax monetary policies.
Goldman Sachs strategists recommend buying the Kospi index in South Korea and shorting the Ibovespa index in Brazil. The reason is that the Brazilian stock market is near historical highs, but the expected upcoming interest rate hikes may put pressure on the domestic stock market in Brazil, while weak demand may also affect Brazil's commodity market.
They also pointed out that the long-short ratio of Kospi to Ibovespa is approaching its lowest point in nearly 5 years, making it a good entry point now.
Furthermore, Goldman Sachs has raised its 12-month target for the MSCI Emerging Markets Stock Index from 1125 points to 1175 points, while the index closed at 1075.62 points on Thursday.
In the environment of interest rate cuts, Goldman Sachs believes that long-term stocks will have an advantage unless there is an economic recession.
