Goldman Sachs has indicated a high possibility of a stock market reversal in the coming months due to economic uncertainty. The bank employs a special model to assess risks.
Economic Uncertainty and Stock Market
Goldman Sachs uses its "equity asymmetry framework" to evaluate stock risks based on market conditions and recent economic data. Analysts have noted that the model indicates a greater than 10% chance of a drawdown in the S&P 500 over the next three months.
Factors Influencing Stock Indices
The stock market index tracking the performance of 500 leading U.S. companies also showed a more than 20% chance of a market downturn within the next 12 months. Goldman Sachs analysts attribute the increased risk to low market volatility and recent weakness in the job market.
Inflation and Labor Market Projections
Goldman Sachs anticipates inflation will rise in the second half of the year due to uncertainty surrounding President Trump's trade policies. It is expected that inflation could exceed 3%, leading to additional market instability.
Overall, Goldman Sachs emphasizes the need to monitor potential risks in the stock market, considering the current economic conditions and uncertainties related to inflation and trade policies.
