Why a Global Stock 'Meltdown' Won't Happen Soon: Goldman

Investors are increasingly worried that a steep drop in stock prices is on the horizon, given the length of the bull market and historically high valuations, plus the added factor of mounting trade tensions that may put a dent in economic growth. Sheila Patel, the Singapore-based CEO of International Goldman Sachs Asset Management, sees no reason for panic. As she told CNBC: "It seems a bit early to us to be concerned about a full-on, global meltdown in equities."

Patel continued: "Are there valuation issues? Certainly. Have we seen clients get more cautious in areas such as U.S. equities? Definitely. But have we seen full-scale fear come into the marketplace? No. Now, of course, there are always contrarians that say fear is a good thing, so the lack of fear is concerning. We are cautious in some places, but we are not poised for that crack in the market just yet."

'A Drop in the Bucket'

The growing prospect of a trade war between the U.S. and China, the world's two largest economies, has investors rattled, but Patel tried to put the risk in perspective. As she noted in her CNBC interview: "When you get to it, $50 billion or $100 billion (in proposed tariffs), it's a drop in the bucket relative to the size of the Chinese or U.S. economy. In fact, a 25 percent tariff on $100 billion of China trade is 0.2 percent of gross domestic product for China."

Nonetheless, Patel noted that both Goldman and Goldman's clients in emerging market economies, particularly in India, are shifting their equity investments toward domestic-facing businesses that are largely insulated from trade tensions. As she told CNBC, "The things they're avoiding and the things that people are worried about are big, global multi-nationals and their exposure to these kinds of trade tariffs." Meanwhile, she observed that, in total, the U.S. generates only about 8% of revenue for companies in emerging markets. During the discussion, CNBC flashed a graphic indicating that Goldman finds the most attractive equity investment opportunities to be in emerging markets right now.

Credit Suisse worries that a large number of major U.S. companies are heavily reliant on global supply chains that trade conflict threatens to disrupt. They also note that Chinese retaliation may include encouraging consumer boycotts of U.S. companies. (For more, see also: 6 Stocks At High Risk In A Trade War.)

'Collision Course With Disaster'

Among those less sanguine than Patel is Scott Minerd, global chief investment officer of Guggenheim Partners. He believes that the stock market is on "a collision course with disaster," as rising interest rates push highly-leveraged companies into default, and stocks plummet by 40%. He also sees massive overbuilding in commercial real estate, and a recession that is likely to begin by late 2019 or early 2020. (For more, see also: Stocks On 'Collision Course With Disaster,' Face 40% Drop.)

Veteran emerging markets fund manager Mark Mobius, meanwhile, sees a 30% market drop coming. Among his top concerns are excessive consumer confidence and a "snowball effect" from mass selling of ETFs, largely generated by trading algorithms. (For more, see also: Contrarian Mark Mobius Sees a 30% Stock Plunge.)

Yield Curve Jitters

An inverted yield curve, in which short-term interest rates exceed long-term rates, typically signals recessionary expectations, and often is followed by an economic downturn. The yield curve on U.S. Treasury securities has been flattening, and now the yield spreads between various short and long maturities are at their lowest in more than a decade, Bloomberg reports.

'The Mother of All Risks'

"I think inflation is the mother of all risks here," is the opinion of Torsten Slok, chief international economist at Deutsche Bank, in remarks on CNBC. The Consumer Price Index for All Urban Consumers (CPI-U) rose by 2.4% for the 12 months through March, and by 2.1% when the more volatile food and energy components are excluded, per the U.S. Bureau of Labor Statistics. A significant, sustained breakout above 2% for inflation is likely to provoke more aggressive interest rate hikes by the Federal Reserve, Slok notes, posing risks for stocks. Moreover, these rate hikes are likely to produce a steeper yield curve, Slok adds, per CNBC.