The global rally stalls out, but Goldman Sachs is doubling down on value stocks

December 7, 2020, 10:34 AM UTC

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Good morning, Bull Sheeters. The global rally is on pause this morning as storm clouds—mainly in the form of COVID gloom and Brexit uncertainty— gather. It’s a risk-on morning.

That’s after all three major U.S. indexes closed out last week in record territory. A big thanks to Rey Mashayekhi for taking the keys to shepherd you through that. See, good things happen when Rey is in charge.

Let’s check in on today’s action where I get into Goldman’s bullish call on value stocks for 2021.

Markets update


  • The major Asia indexes are mostly lower in afternoon trading with Japan’s Nikkei down 0.8%.
  • China reported a big jump in November exports, its biggest monthly gain since the pre-COVID days of early 2018. Less impressive was China’s import growth last month.
  • Metal movers. The price of copper, aluminum, iron ore, zinc and other raw materials continue to climb, a classic bet by investors that the global economy will bounce back strongly in 2021.


  • The European bourses are mostly lower out of the gates with the Stoxx Europe 600 down 0.5% two hours into the trading session.
  • The pound sterling is falling this morning as—stop me if you’ve heard this one—post-Brexit trade talks continue to muddle down to the wire.
  • Iconic British retailer Debenhams, which is on the brink of liquidation, could get thrown a lifeline as acquisition talks pick up again. It’s been a brutal Christmas period for the U.K.’s retail sector. Imagine what a no-deal Brexit would mean for Britain’s high street.


  • U.S. futures point to a weak open as the sugar high of stimulus talks fade. Last week, all three major indexes advanced for the week.
  • It’s a huge week for IPOs as DoorDash and Airbnb both look to make their stock market debut. According to the Wall Street Journal, DoorDash is looking to price shares in the $90 range, and Airbnb close to 60 bucks.
  • Count Goldman Sachs among the converted EV bulls. It sees electric vehicle options accounting for nearly 20% of the market by decade-end, and the incoming Biden administration as a big jolt for the greener vehicles. As such, Goldman sees a Tesla 12-month price target of up to $780 a share.


  • Gold is down, trading below $1,840/ounce.
  • The dollar is up, but it’s nearing a 6-year low.
  • Crude is down, with Brent futures trading below $49/barrel.
  • Bitcoin is flat, trading above $19,300.
  • And the price of the mighty white truffle, a Bull Sheet favorite, sits at €2,650/kg, according to the trusty Borsa Tartufo di Acqualagna. In an all-cash transaction, I paid €60 for a few loose nuggets this weekend that we ended up shaving over a dish of risotto, a meal that later returned in my dreams.


Paying dividends

The S&P 500 closed on Friday at 3,699.12, a whisker below the much-watched Goldman Sachs year-end forecast of 3,700. Clearly, Goldman underestimated all you bulls.

The benchmark index is up an impressive 4% over the past month, helped by the vaccine breakthroughs and the promise we just may begin to beat back this COVID scourge. In that time, value stocks have surged 12%, and, Goldman adds, “dividend futures represent an attractive remaining laggard opportunity.”

That’s because all manner of companies, from Marathon Oil to Estée Lauder, have resumed paying investors dividends. As the chart below shows, there were 67 dividend decreases and/or suspensions between March and August this year, but just one since then and now. And, over the past three months, we’ve seen 72 dividend increases and/or initiations.

That’s the good news. Here’s the not so-good-news.

Goldman writes that the market for dividend contracts for the year ahead implies dividends for S&P 500 companies will actually decline 5% in 2021 and a further 1% in 2022. Further out, the picture doesn’t get much better. “In fact, the dividend yield curve is inverted through the next decade, with every contract through 2029 trading below 2019 levels, implying average annual dividend growth of -1% from 2019-2029.”

Here’s what that looks like (as indicated by the grey dotted “swap market” line).

That view is not just pessimistic, it runs counter to the bullish sentiment around surging equity prices. Investors are pushing up stocks even as earnings take a hit. And, of course, when the bottom line underperforms, companies cut back on dividends, which is what the swap markets line is telling us.

But Goldman sees a glass-half-full here. It projects dividends per share will continue to trend upwards next year and beyond, throughout the decade.

Goldman expects an earnings rebound in 2021, and that “will lead to 5% dividend growth in 2021.”

There’s something to Goldman’s logic. Value stocks are reliable dividend-payers, and investors are flooding into such stocks in droves.

The question is: how long will this “laggard opportunity,” as Goldman calls it, last?



Last spring, my hornets made the front page of the New York Times. Okay, they weren’t my hornets. But, yeesh, they sure looked like them. Nasty, winged monsters. Visibly large mandibles. And those eyes! The Times called them murder hornets, explaining they’d made the journey all the way from Asia. 

I sent the article to Walter, a trusted source on these kind of things. He’s a German beekeeper. He always seems to have a fix on the next eco intruder that’s throwing our natural world out of whack. Walter texted me back. Yep, we’ve had them here in Europe for over a decade, he replied.

In the summer of 2019, a gang of tenacious hornets—calabrone as the Italians call them; killer calabroni, I probably muttered long before the Times headline writers won over the internet—descended on our little hilltop in Amandola, and set up a nest high in the elm tree, a few meters from the house. My kids and wife hounded me to do something, anything. My neighbors suggested I smoke them out. Channeling my inner Solomon, I decided to ignore them—every one of them: my neighbors, my family and the hornets. 

And, you know what? We survived. The murder hornets didn’t kill us. (But that didn’t stop my neighbor from lighting a fire at the base of the elm tree a few days after we headed back to Rome. The singed trunk greets us as we pull into the driveway now.)

Fast-forward to this summer. And, this being 2020, the killer calabroni were back. But in larger numbers, and they were now flying into the house, down through the chimney. Clearly, I could no longer ignore them. (I later learned from a reliable source that the 2020 variety were native European hornets, not the Asian killers; this bit of information did little to appease my wife and kids.)

Okay, but there’s no way I’m burning down the trees to get rid of them, I told everyone, just to establish some basic ground rules. I bought traps instead. I filled them with beer and honey, and hung them from tree branches. That worked for a little while—until my neighbor, Simona, got stung in September when she went round the house to check on it.

Bernhard, she grumbled, you have to do something about these calabroni. 

So, with some time off last, I went back to Amandola to plot out our defenses for 2021. Technically, lockdown rules prohibit travel between regions—that is, unless it’s an emergency. My wife, kids and Simona chimed in: this is an emergency!

Snow has already fallen up there, and so the hornets are long gone for the season. I lit a big fire in the fireplace and all kinds of little winged cadavers fell into the fire from the chimney above. I opened a bottle of wine, and admired the fire. I grabbed my book, and was just settling into reading… when the doorbell rang.


She wanted to know whether I’d figured out how to make our little patch of Amandola a no-fly zone for hornets. My wife texted me, wondering the same. 

They want me to get on a ladder and fasten a screen around the top of the chimney so the hornets can no longer enter the house. Pino, my old gardener, thinks this is a bad idea—that it will soot up in no time, asphyxiating the vertebrates below who just want to sit near the fire and read a book.

I have a few months to figure out my next step.


Have a nice day, everyone. I’ll see you here tomorrow. 

Bernhard Warner

As always, you can write to or reply to this email with suggestions and feedback.

Today's reads

Move over FOMO. Now there's a new markets acronym gaining attention: TINA. As in, there is no alternative. To stocks, or course. The Wall Street Journal's James Mackintosh breaks down what drove this epic year for stocks, and what it means for the year ahead.

Wipeout. You can't turn on the radio or TV here in Europe without getting a report on the super controversial decision to put the 2020-21 ski season on the deep freeze. The continent's ski powers—Italy, France, Austria and Germany—are shutting down the pistes until mid-January (and perhaps longer), crippling Europe's winter sports industry. Switzerland, however, is bucking the trend. They've opened to skiers and snowboarders, and that's causing a huge diplomatic spat between the alpine neighbors. (The idea of a winter with no skiing bums me out to no end. I may need to ask Santa for snow shoes.)

Some of these stories require a subscription to access. There is a discount offer for our loyal readers if you use this link to sign up. Thank you for supporting our journalism.

Market candy

Quote of the day

There’s a clear economic case for the stimulus, but I think it’s important to remember that the economy has continued to recover, has continued to heal... Another round of stimulus will simply speed up that healing process in a way that could be very powerful for the trajectory of growth once we have the vaccine.

That's Michelle Meyer, head of U.S. economics at Bank of America, one of the economists who spoke to Fortune's Anne Sraders last week to detail what they would like to see come out of the latest round of stimulus talks, and why it's so important for the economy and the markets. 

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