Correction in equities would be a buying opportunity, Goldman says

Bank's strategists cite signs that markets are headed for a drop of 10% to 20% in coming months.
JAN 29, 2018
By  Bloomberg

Goldman Sachs Group Inc. predicts a correction in global stocks is on the horizon, but says any such pullback would be a buying opportunity. Strategists at the U.S. bank say signals are flashing for a drop of 10% to 20% in equity prices in the coming months. Goldman's risk appetite gauge is hovering near a record high, indicating a sharp rise in investor optimism, while traders seem complacent about political risks like Italy's national elections, they say. Still, the risk of a full-blown bear market is viewed as low, as strong and synchronized global growth provides a reason to stay bullish. "We do not believe that this would be prolonged or morph into a bear market," strategists including Peter Oppenheimer wrote in a note on Monday. "Historically, there are many examples of corrections that are short-lived and do not turn into more drawn-out bear markets that are typically associated with economic weakness." Goldman, which remains overweight global equities, defines a bear market as a drop of 20% or more. (More: 2018 outlook on equity investing is mostly bright) The amount of value added to U.S. equities in January is poised to exceed any month on record, data compiled by Bloomberg show, while the MSCI All-Country World Index is trading near an all-time high, buoyed by optimism over growth and corporate profits. While the recent strength of global stocks does not mean they must enter a correction phase, it suggests one is overdue, Goldman says. "Rising valuations, amid increased optimism, make the market more vulnerable to a setback even if the underlying trend remains intact," the strategists wrote. (More: Are your clients ready for higher volatility?)

Latest News

No succession plan? No worries. Just practice in place
No succession plan? No worries. Just practice in place

While industry statistics pointing to a succession crisis can cause alarm, advisor-owners should be free to consider a middle path between staying solo and catching the surging wave of M&A.

Research highlights growing need for personalized retirement solutions as investors age
Research highlights growing need for personalized retirement solutions as investors age

New joint research by T. Rowe Price, MIT, and Stanford University finds more diverse asset allocations among older participants.

Advisor moves: RIA Farther hails Q2 recruiting record, Raymond James nabs $300M team from Edward Jones
Advisor moves: RIA Farther hails Q2 recruiting record, Raymond James nabs $300M team from Edward Jones

With its asset pipeline bursting past $13 billion, Farther is looking to build more momentum with three new managing directors.

Insured Retirement Institute urges Labor Department to retain annuity safe harbor
Insured Retirement Institute urges Labor Department to retain annuity safe harbor

A Department of Labor proposal to scrap a regulatory provision under ERISA could create uncertainty for fiduciaries, the trade association argues.

LPL Financial sticking to its guns with retaining 90% of Commonwealth's financial advisors
LPL Financial sticking to its guns with retaining 90% of Commonwealth's financial advisors

"We continue to feel confident about our ability to capture 90%," LPL CEO Rich Steinmeier told analysts during the firm's 2nd quarter earnings call.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.