Goldman Sachs: Markets have not reached “danger zone” levels yet

The Goldman Sachs logo appears on the trading floor of the New York Stock Exchange (NYSE) in New York City, New York, USA, on November 17, 2021. REUTERS / Andrew Kelly / File Photo

LONDON, Jan. 26 (Reuters) – High valuations and one of the strongest gains from a bear market in history have made stocks vulnerable to a correction, but the recent decline is not a sign that markets have reached “danger zone” levels yet, Goldman Sachs said in a note.

“Although it has not reached danger zone levels that typically precede a bear market (a fall of at least 20%), it has reached levels that have typically been consistent with corrections and relatively low returns over the next one and five years,” It informs the US investment bank on Wednesday.

US equities fell on Tuesday, rising nearly 9% so far this month as uncertainty surrounding an increasingly hawkish Federal Reserve and rising geopolitical tensions led investors to dump high-flying technology stocks.

Goldman Sachs said markets are in a correction phase within a bull market cycle and current levels mean relatively low returns over the next one to five years.

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Reporting by Saikat Chatterjee; editing by Danilo Masoni

Our standards: Thomson Reuters Trust Principles.

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