Goldman Sachs warns stock market could drop another 20%

Two analysts from banking giant Goldman Sachs are warning that the stock market could face a 20% decline in the next 12 months.

The bearish prediction came from Goldman’s chief economist, Jan Hatzius, and chief global equity strategist Peter Oppenheimer, who outlined their outlooks in a May 8 podcast titled “On the precipice of another dip?”, accompanied by a similarly titled piece of research published two days prior.

Goldman Sachs’s chief economist sees a 45% chance of a U.S. recession occurring in the next 12 months. Hatzius highlighted that soft data, such as sentiment surveys, has painted a grim picture, but that hard data provides a more optimistic sight. 

With that being said, he did note that hard data lags — and that trade commerce being brought forward to avoid tariffs could mean that the disparity is even more significant this time around.

Chief global equity strategist Oppenheimer added that, while first-quarter earnings were “reasonably decent” and well-received by investors eager to buy the dip, those quarterly reports did not cover the period since the tariff turmoil kicked in.

Stock market could face a significant downturn with S&P 500 falling to 4,600, per Goldman Sachs

Peter Oppeneimer also noted that, as the U.S. market is at a price-to-earnings (P/E) multiple of 20, it isn’t particularly cheap at the moment. Per the equity strategist, a 10% fall in earnings, which wouldn’t be out of line for a recession, could also lead to a lower multiple — taking the S&P 500 down to 4,600.

On Friday, May 9, the benchmark index closed at 5,659, down 3.77% on a year-to-date (YTD) basis — so Oppenheimer’s forecast implies an 18.71% downside from the S&P 500’s latest close. 

On a slightly more optimistic note, Goldman Sachs holds the view that we are not facing a structural bear market, which tends to bring about a greater drop and last longer than event driven bear markets such as the one we currently find ourselves in.

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