Goldman Sachs has cut its three-month rating on equities to "underweight", saying its risk appetite indicator has turned neutral, which suggests that markets are more vulnerable to growth and policy disappointments.
The downgrade follows a recent rally in risk assets which Goldman said has been driven by a combination of light positioning into Britain's vote to leave the European Union and a search for yield.
"Given equities remain expensive and earnings growth is poor, in our view equities are now just at the upper end of their 'fat and flat' range," Goldman strategists said in a note.
Goldman remains "neutral" on equities over 12 months and is still "overweight" on cash.
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