Goldman Sachs Forecasts Record Stock Market Highs: What Investors Need to Know

Goldman Sachs Predicts Record Highs for Stock Market, Followed by Volatility

Goldman Sachs’ trading desk is forecasting record stock market highs in the coming four weeks, followed by a potential downturn, according to a recent analysis. The investment bank’s bullish outlook until mid-September is driven by a low volatility environment and anticipated corporate buybacks.

Scott Rubner, a strategist at Goldman Sachs, noted, “We just witnessed one of the largest and fastest unwinds that I have EVER seen.” The firm believes the stock market is entering a highly positive four-week equity trading window, with the pain trade for equities pointing upward.

Contributing factors to this optimistic outlook include the start of global two-week vacations, which typically reduce bearish sentiment, and historically low volatility markets during late summer weeks, which tend to be bullish for stock prices.

The CBOE Volatility Index has experienced a historic decline, dropping 62% in just nine days – the largest such decrease on record. This sharp reduction in volatility is expected to encourage professional trend followers to return to a buying stance following the early-August sell-off.

Corporate buybacks are also anticipated to play a significant role in the market’s upward trajectory. Companies with authorized share repurchase programs are expected to be active buyers, particularly before the corporate blackout window begins on September 13 for approximately half of the companies. The August to September corporate repurchase window has historically been strong, with an estimated $1 trillion in stock buybacks projected for this year.

Currently, the S&P 500 is less than 1.4% below its record high, further supporting the potential for new peaks in the coming weeks.

However, Rubner’s bullish outlook extends only until September 16, after which he anticipates increased volatility. The second half of September is historically the worst two-week trading period of the year, and this year may prove particularly challenging given the pre-election environment.

Despite the expected turbulence in late September, Rubner maintains an optimistic long-term view. He predicts the stock market will conclude the year at record highs, with new peaks anticipated in the fourth quarter, particularly in November and December.

A key factor in this projection is the record $7.3 trillion currently held in U.S. money market funds, which is expected to flow into stocks and bonds following the U.S. election in early November.

As the market navigates these anticipated fluctuations, investors are advised to remain vigilant and prepared for both the projected surge and subsequent volatility in the coming months.