US banking giant Goldman Sachs just issued an alert to investors.
In a new note to clients, the firm’s strategists say a series of fundamental factors suggest a market correction is on the horizon, reports Investing.com.
Goldman points to declining real income growth, a slowdown in the nation’s GDP growth and weakening consumer sentiment as headwinds as the second half of the year kicks off.
The strategists say stocks may be overbought, pointing to the S&P 500’s recent outsized performance compared to other markets.
They also point to rising concentration in equities, with the ten largest companies in the index carrying the most weight since 1929, as an additional negative factor.
Goldman’s team says the election cycle could also act as a negative catalyst in the short term.
“Election concerns in the US and Europe may also hit consumer and business confidence in coming months.”
Goldman says current market conditions often correspond with bearish “inflection points” in the market, offering “a warning signal that a correction and period of higher volatility and lower returns is now more likely.”
Although the data suggests a move to the downside is likely, the strategists say they do not believe a long-term bear market is about to begin, pointing to a slightly expanding economy and the potential for rate cuts as a pair of positives.
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