Monday, May 16, 2016

6 Reasons Why Goldman 
Is Suddenly Warning About 
A "Large Drop" In The Market
1. Valuation is a necessary starting point of any drawdown risk analysis. At 16.7x the forward P/E multiple of the S&P 500 index ranks in the 86th percentile relative to the last 40 years .. The most likely future path of U.S. equities involves a lower valuation.
2. Supply and demand trends also suggest downside risk .. Since the end of March, investors have bought $23 billion worth of futures positions, lifting our Sentiment Indicator to 32, a less bullish level compared with mid-winter.
3. Corporate buybacks represent the single largest source of equity demand but may wane during coming months. 
4. We believe more likelihood exists for an incremental hawkish surprise than a dovish surprise.
5. Now-dormant economic growth concerns could awaken at any time and provide a catalyst for a sell-off .. The UK “Brexit” referendum on June 23 represents another imported economic risk.
6. The U.S. presidential election is now part of every client conversation. The closeness of the race appears to be underpriced by the market given polls in prior presidential elections tightened as voting day approached. History shows that during a typical presidential election year, the S&P 500 index remains relatively range-bound until November. But thus far 2016 has hardly followed a regular election playbook. The upcoming party conventions (Republicans on July 18-21 and Democrats on July 25-28) will almost assuredly raise political uncertainty and weigh on equity valuations.
LINK HERE to the article

No comments: