Analysts at U.S. investment bank Goldman Sachs (GS) say that stocks are unlikely to enter a bear market defined as a decline of 20% or greater.
In a note to clients, Goldman Sachs said that a bear market for U.S. equities is an unlikely scenario this year as the risk of an economic recession remains low and the U.S. Federal Reserve is widely expected to lower interest rates in coming months.
The market strategists at Goldman said that the biggest risk to stocks currently are high valuations due to a bull market that has been ongoing for nearly two years.
While stocks might come down this autumn, the odds of entering a bear market are low, especially as the private sector and corporate earnings remain strong.
The report from Goldman Sachs also notes that stock declines of 20% or more have become increasingly rare since the 1990s as business cycles last longer and economic volatility is tempered by central banks.
The comments from Goldman Sachs come as stocks have fallen sharply to begin September, which is historically the worst month of the year for equities.
So far this month, the benchmark S&P 500 index has declined 4% and is down from a record high reached in July of this year.
Futures traders are betting that the U.S. Federal Reserve will lower interest rates by a full percentage point by year’s end, starting with a cut at its next policy meeting on Sept. 18.
The stock of Goldman Sachs has risen 26% this year to trade at $488.57 U.S. per share.
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