The recent pullback in U.S. stocks could be close to an end if history is a guide, according to strategists at Goldman Sachs Group Inc. and Deutsche Bank.
Its magnitude has matched a “typical” sell-off in the S&P 500 since the financial crisis, albeit at a faster pace, a team led by Goldman’s David Kostin wrote in a note Friday. And options positioning -- at the core of the weakness -- has normalized, their counterparts at Deutsche, including Srineel Jalagani, noted the same day.
“Despite the sharp sell-off in the past week, we remain optimistic about the path of the U.S. equity market in coming months,” the Goldman strategists wrote. “Since the financial crisis, the typical S&P 500 pullback of 5% or more has lasted for 20 trading days and extended by 7% from peak to trough, matching the magnitude of the most recent pullback if not the speed.”
A reassessment of historically high equity valuations and volatility in options markets has sent the S&P 500 down about 7% from its record close on Sept. 2, though it remains almost 50% above its March low. The Nasdaq 100 is off 11%, after investors questioned whether a rally in the tech-heavy gauge might be too frothy.
Meanwhile, the Deutsche team focused on the impact of the options market, using a metric that looks at the number of bearish contracts relative to bullish ones. That measure had fallen to the bottom of its 10-year range -- indicating an extreme level of positive sentiment -- but after the correction has already recovered to “about average” levels, the team said.
“Historically, corrections in the put-call ratio have tended to have sharp but short-lived market impacts,” the strategists wrote.
Still, both teams pointed to the U.S. elections as the key source of uncertainty for markets ahead.
“Investors still have to contend with the upcoming macro event of the U.S. presidential elections,” the Deutsche strategists warned. “With a likely unprecedented volume of mail-in ballots, prospects for volatility enduring post-election day are high.”
A $141M judgment and a federal asset freeze collide over one shrinking pool
The firm's CFO and EVP of Wealth Management Solutions are the latest executives to exit the broker-dealer.
Clients are saying they would consider switching advisors if another professional offered estate planning services, according to a new Trust & Will survey.
CEO Laurel Taylor says the fintech's composable AI stack helps workers optimize dollars across Trump Accounts, 529s, 401(k)s, and other employee benefits.
The bank has swiped three private banking veterans from BNY as the city climbs the ranks of America's fastest-growing wealth hubs.
Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income
Direct indexing is on pace to outgrow ETFs and mutual funds. Northern Trust's Ken Lassner explains why the advisors who get it wish they had started sooner.
