A potential crisis in the global banking sector could have been averted over the weekend, when Swiss authorities stepped in to broker a deal for UBS to acquire the troubled Credit Suisse. But the stock market isn’t over yet, according to Peter Oppenheimer, global chief strategist at Goldman Sachs. He believes contagion concerns surrounding the banking sector are just one of several risk factors affecting equities and predicts the market will remain “fat and flat” in the near-term. “Even if the market recovers from current levels in the short term, high uncertainty and lower confidence levels could mean an ongoing ‘fat & flat’ market as valuations have doesn’t look particularly appealing,” Oppenheimer wrote in a note on March 17, ahead of the announcement of the Credit Suisse bailout. According to Oppenheimer, this pricing problem has two reasons. “The first is that the US stock market, which has long been significantly outperformed, remains expensive compared to historical and real interest rates. Although valuations outside the US are cheaper – an important factor. in the recent outperformance – other markets are unlikely to decouple any US-led correction,” he said. The second reason, according to Oppenheimer, is that there is currently a much larger hurdle for stocks to overcome, according to Oppenheimer, with other assets looking more attractive. He said US stocks continue to be tense and offer “very little return”, while cash and short-term debt look “very attractive” compared to stocks. Ahead of the next Federal Open Market Committee meeting on Tuesday, Oppenheimer believes even a rate cut will not provide a meaningful boost to the stock market. He noted that U.S. stocks delivered their usual double return after the first rate cut, but barely any gains three months later. “Twelve months after the first cut, returns tend to be positive but below average. Poorer returns largely reflect weaker growth. This is why stocks often perform better when interest rates rise,” he said. How to Trade Despite the uncertainty in the European banking sector, Oppenheimer believes that European stocks will continue to outperform American stock companies. He said Europe’s outperformance was the result of relatively improved fundamentals, positive capital inflows and cheaper valuations. “In the meantime, we continue to prefer companies with strong balance sheets and stable margins. Among the more defensive market segments, we’re eyeing Caring health in both the US and Europe.We will also focus on earnings strategies such as dividends and buybacks,” added Oppenheimer. In addition to stocks, he is also running out of cash in his global asset allocation, given greater uncertainty about the short-term path to corporate profitability.