Goldman Speaks! Should You Listen?

Here is a common story to test your financial news reading skill. The headline describes a conclusion from “Goldman.” Here is the example, beginning with the title:

Goldman says highest valuations since 1900 leave investors in for a world of hurt

The article lead emphasized the warning, as did the first paragraph.

Investors beware, there is pain ahead, says Goldman Sachs. The only question is whether it will happen fast or slow.

The Wall Street bank is warning that after years of stretched valuations, a day of reckoning is near.

“We are nearing the longest bull market for balanced equity/bond portfolios in over a century, boosted by a ‘Goldilocks’ backdrop of strong growth without inflation. A 60/40 portfolio has not had a drawdown of more than 10% since the great financial crisis,” wrote Christian Mueller-Glissmann, a London-based equity strategist, in a note.

At the same time, the average valuation percentile across stocks, bonds, and credit is highest since 1900, he said.

The average investor sees a story like this from a Dow Jones source and pays attention. While some will move on, others will nudge the fear gauge higher, and reduce their equity holdings.

There are several problems:

  • Goldman is an organization, not a person.
  • Authorized and “official” releases are expected to be limited both by topic and by circulation.
  • In the modern, aggressive media environment, the search for confirming stories never ends. Many of the leading media outlets depend on providing confirmation bias to a loyal audience.
  • The source is not described as a managing director (over 2100 people, so pretty exclusive) or a partner (even more exclusive).

Try this contrast —–

Suppose the story had cited an intelligent and promising young Goldman employee, one of tens of thousands. Would it be as interesting or persuasive?

The Real Goldman Story

David Kostin, Chief Equity Strategist for Goldman is the authorized source of official conclusions. He has appeared in both broadcast and print media in the past week, explaining his bullish outlook. In one typical example he explains that an earnings-driven rally can drive “rational exuberance” over the next three years.


I do not intend to support one viewpoint or another. I am not recommending either Goldman source. This is about how to read financial news.

  • Beware of stories that attribute the viewpoint of a single person to an entire organization.
  • Double check the credentials and background of quoted sources.
  • Make sure the headline matches the supporting material.

If your approach to financial news emphasizes just the headlines, you are better off reading something else!

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