Goldman Sachs gets cautious on stocks, sees risk of a late summer correction

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Stock Markets,Dow Jones Industrial Average,Goldman Sachs BDC Inc

Goldman Sachs is warning clients of a summer correction in the stock market as economic growth slows down and political risks rise.

"After a strong rally in equities in 1H we see risk of a setback in the summer due to the combination of weaker growth data, already more dovish central bank expectations and rising policy uncertainty into the US elections," Christian Mueller-Glissmann, Goldman's head of asset allocation research, said in a note. The Wall Street firm shifted its rating to neutral across assets on a three-month horizon, including equities, commodities, bonds, cash and credit.

Goldman said it sees increasing risk of a correction. Typically, a correction is defined as a 10% drawdown from a recent high in the S & P 500 and a bear market equals to a 20% pullback. The firm noted it doesn't see that correction turning into a bear market. "Only when our cycle growth score shifted below zero, which has historically been mostly around recessions, did equities have drawdowns in excess of 20%," the strategist said.

 

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