American banking giant Goldman Sachs has just issued a warning to investors.
In a new note to clients, the company’s strategists say a range of fundamental factors indicate a market correction is on the horizon. reports Investing.com.
Goldman points to slowing real income growth, a slowdown in the country’s GDP growth and weakening consumer confidence as headwinds as the second half of the year gets underway.
The strategists say the stocks may be overbought, pointing to the S&P 500’s recent outperformance compared to other markets.
They also point to the increasing concentration in equities, with the ten largest companies in the index carrying the most weight since 1929, as an additional negative factor.
The Goldman team says the election cycle could also act as a negative catalyst in the short term.
“Election concerns in the US and Europe could also damage consumer and business confidence in the coming months.”
Goldman says current market conditions often correspond to bearish “inflection points” in the market, which “sends a warning signal that a correction and a period of higher volatility and lower returns is now more likely.”
While the data suggests a move to the downside is likely, strategists say they don’t believe a bear market will begin in the long term. This points to a slightly growing economy and the potential for interest rate cuts as positive factors.
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