President Donald Trump’s price break is probably not sufficient to stem a deeper correction on the stock market, Goldman Sachs said on Thursday.
Already, Thursday’s actions made part of the gains recorded during the historic session on Wednesday. Goldman Sachs analysts said they had still seen a “high” risk that the shares have been going even more, even after the significant withdrawal in recent weeks and despite the postponement of Trump, most of his prices on Wednesday.
The Goldman Sachs Actions to Departing actions, which bases its additional market for the market on a handful of indicators, has recently increased by 35% over a three -month and 12 -month horizon. This is a strong signal that the S&P 500 goes to new decreases, wrote the bank in a note, adding that the risk of drop in the model has been high since January.
The risk of additional decrease in shares exceeded 35% on a three -month horizon and 12 months. HAVER Analytics / Datastream / Goldman Sachs Global Investment Research
“Usually, the levels above 35% give a strong signal for risk of decrease for shares, and the probabilities for 3m and 12m are now higher than these levels, in particular when applying the macroérized reference line of our economists,” wrote analysts. “As we have previously shown, historically, a probability of withdrawal of higher actions has resulted in lower term yields for actions and the risk of deeper maximum prints.”
Analysts said several factors had increased the risk of more inconvenience.
On the one hand, the main indicators of growth in the economy have decreased. In particular, the bank highlighted the recent drop in manufacturing activity, with new orders and production measures that contract during the month of March, according to the Institute for Supply Management.
And recent market volatility has also harmed the prospects of actions. The CBOe volatility index, also known as the gauge for fear of the stock market, has decreased slightly since Trump implemented the reciprocal prices for the first time but remains high compared to the levels at the start of the year.
Political uncertainty also remains high. The uncertainty index of American economic policy, a measure of unpredictability, increased at a level of 689 Wednesday, according to data from the Federal Reserve, down compared to a peak of 992 this month but still high on a historic basis.
The downward risk also seems that he has not yet culminated, said Goldman.
“Before a clear peak in the probabilities of withdrawal of actions, the risk of additional corrections remains high in the short term. The size of the demerits does not reduce the risk of short -term withdrawal,” said analysts.
Goldman Sachs canceled his recession forecasts after Trump interrupted most of the reciprocal rates on Wednesday, but the bank still claims that the economy will pay a slowdown from next year.
Previously, analysts said they saw the S&P 500 lower as low as 4,600 in a full slowdown scenario, which implies that the index decreases by 13% of its levels on Thursday, or a decrease of 25% compared to its February record.
The concerns about prices have significantly weighed on Wall Street’s prospects in recent weeks. Goldman Sachs, Barclays and RBC are among the big banks that have reduced their forecasts in shares, citing the trade war as a major side for stock prices.
