One measure shows the stock market is still affordable at current levels – but investors should avoid these 3 bubble-like pockets, Goldman Sachs says

One measure shows the stock market is still affordable at current levels – but investors should avoid these 3 bubble-like pockets, Goldman Sachs says

Account active since Concerns of stock-market bubbles aren't misplaced, but certain gauges suggest the broader market has plenty more room to run, Goldman Sachs strategists said Friday. Major indexes sit just below record highs as investors bet on vaccine distribution and additional stimulus to accelerate economic recovery. Yet still-elevated COVID-19 case counts and worsening economic data has led some clients to wonder whether stocks' valuations are unsustainable, the team led by David Kostin said in a note to clients. By some of the most popular valuation metrics, the market sits at extremely lofty levels. Price-to-earnings and market cap-to-GDP ratios both point to unusually high valuations. However, accounting for historically low Treasury yields and interest rates, the S&P 500 is actually trading at a "below-average historical valuation," Goldman said. Treasurys remain at relatively low levels after plummeting at the start of the pandemic. Similarly, interest rates sit at record lows and are expected to remain there for the medium-term. Using the popular cyclically adjusted P/E ratio, or CAPE, the broader market's valuation isn't as low as many think, the strategists added. A falling equity-risk premium will offset rising yields and "modestly higher" real rates throughout 2021, the bank added. Goldman reiterated