Market Correction is a Risk Rising Says Goldman Sachs, Bear Market is Unlikely

Goldman Sachs on Tuesday said stocks face a rising risk of a market correction, but a bear market was unlikely. The bank advised investors to buy any dip despite bear market odds.

Despite the odds in the stock market and the new pressures threatening its rebound, Goldman urges investors not to jump ship to take advantage of the times as a prime buying opportunity.

In a Tuesday note, strategist Peter Oppenheimer said equities are following a similar recovery trend seen in the 2008 financial crisis. Prices were seen to have rebound from their recession-induced lows, as investors hurriedly seek to profit from the general economic rebound. However, stocks went into correction the following year after hitting the bottom in 2009.

As a result, market analysts suspect a similar occurrence in today’s market. Goldman recently moved its gauge of risk levels above 1. A slump may likely follow.

“The market is rising on good news but choosing to largely ignore weaker data and rising infection rates,” the Goldman strategists’ team said. “Rapid fund flows and highly correlated risk assets make a correction in the near term increasingly likely.”

Goldman also said that a bear market is unlikely, as its Bull/Bear Market Indicator stood on more moderate levels, recently. It currently sits below the 70% threshold the bank considers as a “danger zone.” On the contrary, the strategists view the market to be in an early bullish stage, with near-term risks giving way to steady gains as the global economy bounces back.

The transition from bull market to bear market is often marked by strong volatility and a short setback, while investors await or begin to doubt any hope of recovery, the team said. As a result, the trend will cause a stir in the market in coming months. Investors who are able to see beyond the market fuss in the coming months can “make any correction a buying opportunity.”