Goldman Sachs strategists have weighed in on the current state of the U.S. stock market, dismissing concerns about an impending bear market. According to Christian Mueller-Glissmann and his team, a 20% decline in stocks appears unlikely despite high valuations, mixed growth prospects, and policy uncertainty. Their analysis points to key factors, including private sector resilience and expected moves from the Federal Reserve, that could help shield the market from a significant downturn.
Private Sector Strength And Fed Support
The Goldman Sachs team emphasizes the strength of the private sector as a major factor in holding off a market crash. While corporate earnings remain under pressure in some sectors, a healthy labor market and sustained business investments provide much-needed support to the broader economy. These elements, combined with the expectation that the Federal Reserve may start cutting interest rates soon, offer a buffer against a sharp stock market correction.
“We don’t see a high risk of a full-scale bear market,” said Mueller-Glissmann, citing the frequency of downturns in the S&P 500, which has decreased since the 1990s. This trend is partly due to the Federal Reserve’s proactive interventions in times of economic stress, as well as longer business cycles and reduced macroeconomic volatility.
Cautiously Optimistic Stock Market Outlook
Goldman Sachs strategists maintain a neutral stance on asset allocation but remain “mildly pro-risk” for the next 12 months. While they acknowledge that stocks may experience some turbulence by the end of the year, they do not foresee a significant market crash. In fact, the team’s outlook is cautiously optimistic, with the likelihood of continued support from monetary policies helping to stabilize the stock market.
However, the uncertainty surrounding inflation and interest rates still looms. The Federal Reserve’s eventual moves to cut interest rates could ease some pressure on the market, but much depends on how inflation trends over the coming months.
Crypto Market Facing Bearish Signals
In stark contrast to the stock market’s relatively stable outlook, the cryptocurrency market is facing a potential downturn. Julio Moreno, Lead Analyst at CryptoQuant, warns that declining demand is hitting Bitcoin hard, suggesting a bear market might already be taking shape in the crypto sector. Bitcoin has struggled to maintain key support levels, with institutional and retail investors showing signs of fatigue.
Also Read: Goldman Sachs Sets New $2,700 Target For Gold As Prices Surge 22% In 2023
Veteran trader Peter Brandt has weighed in as well, predicting a 65% probability that Bitcoin could fall below $40,000 in the short term. However, Brandt remains bullish over the long term, forecasting a potential price surge to $130,000 by 2025. His outlook highlights the volatility that continues to characterize the cryptocurrency market, making it a high-risk space for investors in the near future.
While Goldman Sachs strategists dismiss fears of a bear market in the U.S. stock market, thanks to the strength of the private sector and anticipated support from the Federal Reserve, the cryptocurrency market is not as fortunate. Bitcoin’s struggle for demand and the looming threat of a market dip present challenges for crypto investors. As the U.S. stock market remains resilient, the outlook for digital assets continues to be clouded by uncertainty. Investors will need to navigate these turbulent economic waters with caution, balancing optimism in traditional markets against the risks in crypto.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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