A potential crisis in the global banking sector may have been averted at the end of the week, as the Swiss authorities stepped in to broker a deal for UBS to acquire the embattled Credit Suisse. But the stock market is not out of the woods yet, according to Goldman Sachs Global Equity Strategist Peter Oppenheimer. He believes the fear of contagion in the banking sector is just one of the risk factors weighing on stocks, and predicts the market will remain “fat and flat” in the near term. “Even if the market bounces back from current levels in the short term, high uncertainty and lower confidence levels could mean a ‘fat & flat’ market as prices don’t look very good,” Oppenheimer wrote in a March 17 note. , ahead of the announcement of the rescue deal Credit Suisse. There are two reasons for this valuation problem, according to Oppenheimer. “The first is that the US equity market, which has long been a significant outperformer, remains expensive relative to history and relative to real rates. Despite lower valuations outside the US – a key factor in the higher performance – other markets are unlikely to de-couple in the US-led correction,” he said. The second reason is that there are now higher hurdles for stocks, according to Oppenheimer, with other assets looking more attractive. He said U.S. stocks continue to look long and offer “extreme returns,” while cash and short-term debt look “very attractive” compared to stocks. Heading into the next Federal Open Market Committee meeting on Tuesday, Oppenheimer believes even a cut in interest rates will not provide a significant boost to equities. He noted that U.S. stocks posted about double their usual gains after the first rate cut, but barely bounced back three months after. “Twelve months after the first crop, returns tend to be positive but below average. Poorer returns are generally a reflection of weaker growth. This is why equities often do better when rates rise,” he said. The way it trades Despite the uncertainty in the European banking sector, Oppenheimer believes European stocks will continue to outperform their US peers. He said Europe’s higher performance was the result of better relative fundamentals, positive inflows, and lower valuations. “Meanwhile, we continue to like companies with strong balance sheets and stable margins. Among the more defensive market segments, we are overweight Healthcare. in the US and Europe. We will also focus on income strategies such as dividends and buybacks,” added Oppenheimer. Outside of stocks, they are also overweight cash in their global asset allocation, given uncertainty about the near-term path to corporate profitability.