CNBC reports that equity markets could be stuck in a “fat and flat” range characterized by weaker returns and greater volatility, according to Christian Mueller-Glissmann, head of asset allocation at Goldman Sachs.

Stock markets have broadly returned to the levels seen before the late-March sell-off, when the coronavirus pandemic spread across the world. This was preceded by a decade of historically strong equity returns with below-average volatility.

However, speaking to CNBC, Mueller-Glissmann suggested that in recent months, declining bond yields and real yields (bond yields minus inflation) had boosted equity valuations, meaning flatter returns for investors.

“At the same time, you still have very high uncertainty on the growth outlook, both in the near term but also in the long term. And on top of that you have increasing uncertainty on inflation, so in all, that makes us, in the medium term, a bit less excited about risk-adjusted returns for equities,” Mueller-Glissmann told CNBC.

Growth and defensive stocks have generally appreciated more over recent months than their value counterparts, such as autos and banks.

Growth stocks are those of companies with significant and sustainable positive cash flow with greater future earnings and revenue expected to grow faster than that of industry peers, whereas defensive names typically offer stable cash flow and consistent dividends to shareholders regardless of overall market conditions. A value stock is a company trading at a discount relative to the strength of its fundamentals, whether that be a strong balance sheet, sales or dividends.

However Mueller-Glissmann highlighted that the key driver of markets in recent months had not been optimism on growth, but rather optimism on inflation. As such, he said there was a “tactical opportunity” for investors in certain sectors.

“You have break-even inflation at incredibly depressed levels, to some extent giving a pretty high probability of deflation in the near term. But even over a 10-year horizon, inflation expectations were low, and those have gotten repriced,” he said.