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

The 2025 InvestmentNews Awards Excellence Awardees revealed
The 2025 InvestmentNews Awards Excellence Awardees revealed

From outstanding individuals to innovative organizations, find out who made the final shortlist for top honors at the IN awards, now in its second year.

Top RIA Cresset warns of 'inevitable' recession amid tariff uncertainty
Top RIA Cresset warns of 'inevitable' recession amid tariff uncertainty

Cresset's Susie Cranston is expecting an economic recession, but says her $65 billion RIA sees "great opportunity" to keep investing in a down market.

Edward Jones joins the crowd to sell more alternative investments
Edward Jones joins the crowd to sell more alternative investments

“There’s a big pull to alternative investments right now because of volatility of the stock market,” Kevin Gannon, CEO of Robert A. Stanger & Co., said.

Record RIA M&A activity marks strong start to 2025
Record RIA M&A activity marks strong start to 2025

Sellers shift focus: It's not about succession anymore.

IB+ Data Hub offers strategic edge for U.S. wealth advisors and RIAs advising business clients
IB+ Data Hub offers strategic edge for U.S. wealth advisors and RIAs advising business clients

Platform being adopted by independent-minded advisors who see insurance as a core pillar of their business.

SPONSORED Compliance in real time: Technology's expanding role in RIA oversight

RIAs face rising regulatory pressure in 2025. Forward-looking firms are responding with embedded technology, not more paperwork.

SPONSORED Advisory firms confront crossroads amid historic wealth transfer

As inheritances are set to reshape client portfolios and next-gen heirs demand digital-first experiences, firms are retooling their wealth tech stacks and succession models in real time.