(Bloomberg). — Equities are on the verge of a rebound, according to strategists from Goldman Sachs Group Inc. and UBS Global Wealth Management. Markets in Europe and America will be ending their first month in green this year.

“To be clear, we see little upside now in the shorter term,” Goldman Sachs strategists led by Peter Oppenheimer wrote in a note. Mark Haefele, chief investment officer at UBS GWM, concurred, saying “our base case now is for only modest upside for stocks.” 

UBS GWM, Goldman and UBS GWM both have a goal of 4700 index points by the year’s end. This is less than 2% above the U.S. benchmark. In a down scenario, they both expect the gauge to drop by between 22% and 3,600 index point. 

Although the developed markets have recovered from losses suffered after Russia’s invasion of Ukraine, January records are not yet set. After a strong recovery that saw indexes reach new heights, the poor performance was due to a weakening economy. 

UBS GWM said its cautious view “partly reflects risks to corporate profits,” while Goldman’s team said “client conversations reveal a notable lack of conviction or enthusiasm for U.S. equities at current valuation levels,” citing a “slowing economy and rising rate environment.” 

Generali Investments echoed the pessimism: “We see little value in chasing the March equity market rebound at this level of valuation,” the firm said in its quarterly outlook. “The sharp fall in equity volatility relative to bond volatility is not sustainable.”

While the rally might be slowing, Goldman and UBS GWM both see investment opportunities. UBS GWM recommends that investors focus on climate, energy, food and data — all areas set to reap the benefits of a renewed focus of security and stability after the war.

For Goldman’s team, instead of playing specific styles such as growth versus value stocks, investors must look for individual companies “that can innovate, disrupt, enable and adapt” and focus on margins.

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