The recent rout in U.S. stocks, the biggest sell-off in two years, is bound to get worse, according to strategists at Goldman Sachs and Citibank.
The S&P 500, which has had a bull-run for the last nine and half years, adding an average 19 percent annually, has been on a correction over the last four months and the retreat might not find a bottom until July, Bloomberg reported.
The S&P 500 is headed for its worst week since October 2008 on fears that the coronavirus outbreak will wreak havoc on the global economy.
Goldman Sachs strategists, led by Peter Oppenheimer, said in a note that investors should prepare for lower returns in the coming years.
The warnings mark a turnaround from January when persistent stock gains prompted at least two strategists to raise their year-end forecasts for the S&P 500.
“Typically, high valuations – or an extended level of this index – imply the risk of a bear market or a period of low returns over the next five years,” the strategists wrote in a note.
“This time we think that lower returns are more likely than an impending sharp bear market.”
Listen to GHOGH with Jamarlin Martin | Episode 69: Jamarlin Martin
Jamarlin goes solo to unpack the question: Was Barack Obama the first political anti-Christ to rise in Black America? To understand the question, we have to revisit Rev. Wright and Obama’s decision to bring on political disciples David Plouffe, Joe Biden and Eric Holder.
The Fed’s continued policy of tapering Treasury purchases has added to investor jitters, according to the strategists.
Goldman Sach’s Kostin said the S&P 500 could fall to 2,900 in the near term, which would be a nearly 7 percent drop from Wednesday’s close, before rebounding to 3,400 by the end of the year.