Analysts at Goldman Sachs believe that Treasury yields will rise in 2015 as the Fed hikes rates but if not, they have released an alternate forecast.
Their base-case is for a 3.00% 10-year yield at year end (it’s at 2.25% today) and a 2.2% rally in stock prices from current levels (2100 in S&P 500). But if Treasury yields stay low then stocks could rally 11%, Goldman Sacs analyst David Kostin said today.
“If interest rates remain below our forecast, then equity returns may exceed our expectations,” he wrote in a Friday note.
With low interest rates, investors will continue to “reach for yield” in the U.S. stock market, he said. That would prompt investors to pay up for stocks, even if corporate earnings growth doesn’t improve.
