Market corrections are good buying opportunities, says Goldman Sachs — but only when this happens

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Is it time to wade in? Yes, if you're confident one thing won't happen, say strategists at Goldman Sachs.

Strategists at Goldman Sachs led by David Kostin ran the numbers.

The good news is that S&P 500 corrections are typically good buying opportunities. Of the 33 corrections of at least 10% since 1950, the median episode has lasted about five months, and encompassed a peak-to-trough decline of 18% — but an investor buying the S&P 500 10% below its high would’ve gained a median return of 15% during the subsequent 12 months.

There’s three key factors investors should watch to see if a rebound can develop — positioning, monetary policy and earnings. None of these factors at the moment are working in favor of buyers. For example, its equity sentiment indicator typically is 2+ standard deviations below average near the bottoms of correction since the global financial crisis, but right now it’s just 0.

 

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