Since the beginning of this year , with the theme of artificial intelligence (AI), large technology stocks such as Huida and Apple have driven the U.S. stock market to continue to rise. The S&P 500 Index, one of the four major U.S. stock indexes, has hit 31 consecutive record highs.
However, Goldman Sachs Group reminded investors in a recent report that the risk of a correction in U.S. stocks is gradually increasing. Now may be a good time to put the brakes on. Investors should remain appropriately cautious and use appropriate hedging strategies to hedge risks.
Goldman Sachs analyst: Three major factors bearish on U.S. stocks
Analysts pointed out that risk factors currently increasing include:
- The U.S. deficit continues to expand, and this year's deficit is expected to reach $1.9 trillion, an increase of $400 billion from the forecast four months ago;
- Retail and institutional investors are continuing to increase their exposure to equities;
- Compared with Q1 this year, the popularity of US stocks in Q2 is mainly driven by a few stocks. History shows that as the concentration of gains increases, the risk of a correction will also increase accordingly;
- U.S. GDP growth is expected to slow from 4.1% in the second half of 2023 to an estimated 1.7% in the first half of 2024, while the unemployment rate rose from 3.5% to 3.8% on a three-month moving average basis. Goldman Sachs noted that the economy is expected to continue weak growth due to lower real income growth and softening consumer sentiment.
Therefore, Tony Pasquariello, head of global hedge fund business at Goldman Sachs Group, recommends:
Given the current low cost of hedging, investors can use tools such as put options to provide a hedging strategy for their investments while retaining high-quality holdings.
As the global election cycle unfolds, market volatility is likely to gradually increase. The current 10-day volatility of the S&P 500 Index is only 5%, which is at an extremely low level.
However, Tony Pasquariello also said that his warning did not mean that investors should flee the market, but called for investors to remain cautious and disciplined. He pointed out:
As long as the economy and corporate earnings continue to grow, sharp selloffs are rare.
JP Morgan: S&P 500 will fall to 4,200 points by year-end
Compared to Goldman Sachs' cautious view, JPMorgan analyst Marko Kolanovic is more pessimistic. As one of the most bearish experts on U.S. stocks, he predicts that the S&P 500 index will fall to 4,200 points by the end of the year:
The S&P 500 will plunge 23% from current levels by the end of the year, falling to 4,200 points.
Will Bitcoin be dragged down by U.S. stocks?
As Bitcoin's correlation with the U.S. stock market reached its highest level in 18 months in June, Bitcoin's 30-day correlation coefficient with Nasdaq grew to 0.64 for the first time since 2022 in early June.
Therefore, if the U.S. stock market experiences a sharp correction as experts predict, it may trigger continued selling of Bitcoin, so investors are advised to be cautious.
