"How Much Further?": Goldman Warns This Is The 5th Longest Streak Ever Without A 5% Correction

Tyler Durden's picture

Goldman is becoming increasingly worried that a correction - and a sizable one at that - appears imminent.

Two weeks after the investment bank announced that according to its Bear Market Risk Indicator the odds of a crash have risen to 67%...

... on Monday morning, Goldman cross-asset strategist Ian Wright cautions in his latest Kickstart letter that the S&P is now rapidly closing in on the longest period in history without a 5% correction, and that as of today, only 4 times in history has more time passed without a 5% correction. The warning follows similar caution from Goldman's chief equity strategist David Kostin who as discussed yesterday, has a very bleak outlook for US stocks, and expects the S&P to slid to 2,400 by the end of the year, remain unchanged through the end of 2018 and rise just 100 points by the end of 2019.

As Wright points out today in a note titled "How much further?" in which he reminds the firm's clients that just last week it reiterated its 12-month OW equities position in our asset allocation, "our sense is that most clients are in agreement, being "reluctantly long" equity given absolute returns are likely to be lower in the future relative to the recent past, but on a relative basis the asset class still appears the most attractive."

And yet, just like Kostin yesterday, Wright says that given this positioning and the good level of current growth leading to concerns about it potentially slowing, "increasingly the most common question we receive is "when will the market crack?" He goes on to show that based purely on the length and resilience of the current bull market this question makes sense, particularly now - the S&P 500 is currently in the fifth longest streak in history without a 5% correction, and should the pattern continue it will become the longest streak ever by mid-December.

That said, Goldman - tactically long equities - is not suggesting a crash is imminent, and caveats that "low volatility rallies can last a long time, and that valuations can be a poor signal for returns and drawdowns in the near-term."

In our view, these dynamics are again at play currently, with any vol being sold on spikes and dips being bought quickly, as the current low vol regime appears intact.

So in light of all the evidence of an imminent correction, what is Goldman's advice to clients? Why, do nothing of course.

Our US equity strategists recently argued against an imminent correction, and our global equity strategist sees low risk of a bear market starting. And while most of the recent central bank meetings (ECB, BoE, Fed) all pointed to tightening policy, we think risky assets should be able to digest higher yields as long as the growth backdrop remains supportive, which we expect.

This, despite two weeks ago laying out no less than 7 reasons why Goldman's clients just can't wait to get out.

  • History. Many investors argue the bull market is “long in the tooth” and will soon come to an end.
  • Volatility (or lack thereof). Realized 3-month vol is nearly the lowest in 50 years. Implied vol as measured by the VIX stands at 12, a 6th percentile event since 1990.
  • Valuation. Equity valuations are stretched on almost every metric. The typical stock trades at the 98th percentile and the overall index at the 87th percentile relative to the past 40 years
  • Economics. The current US economic expansion just celebrated its 8th birthday making it one of the longest stretches without a recession
  • Fed policy. The FOMC has lifted the funds rate by 100 bp since it started tightening in December 2015. During prior hiking cycles, equity P/E multiples typically fell but multiples have actually expanded during the past two years.
  • Interest rates. Two months ago, Treasury yields equaled 2.4%, ten-year implied inflation was 1.7%, and the S&P 500 stood at 2410.
  • Politics. President Trump’s fluid positions on domestic policy disputes in Washington, D.C. and geopolitical gamesmanship with Pyongyang and Beijing make political forecasting a precarious activity.

Meanwhile, the market is now well over 300 days without a 5% correction and counting...

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2ndamendment's picture

So the muppets should buy? I'm confused. :-)

silverer's picture

Most are already all in, from what I've read. This way, the doom and gloom event needs only one torpedo to take everyone out. It's all awesome, totally entertaining if you are lucky enough to be just a spectator.

Ghost of PartysOver's picture

And how much QE was involved in the previous 4?  Garbage study.

YUNOSELL's picture

It seems Goldman is getting desperate for their bets on the market correction with the recent onslaught of all these similar articles from them. I hope the Vampire Squid gets what they deserve.

Jim in MN's picture

Well with the sudden and apparently secret outbreak of world peace, why shouldn't the market go up?

You know, for a while.

thunderchief's picture

This is so irrelevant when central banks are pumping 3 trillion a year into the markets.

Goldman knows this and just thows it out there to mess with the  small brained public.

Next goldman headliner.."Maybe someone is playing around with the gold price, but for gods sake why!??"

Cash2Riches's picture

And meanwhile, the REAL economy continues to stagnant as markets rise. This is a complete and utter Ponzi scheme that is ready to implode. The question is, when will it?

lester1's picture

When you have central banks buying stocks, that's why the market will never go back down, no matter what!

silverer's picture

Umm... the upside due to central bank buying is temporary. Unfortunately.

Golden Breakout's picture

Until they decide to completely blindside you, and pull the rug from under your feet. Just remember the timing will be at their discretion. And when things go tits up, it ain't a pretty picture.

GodHelpAmerica's picture

When do the central banks stop buying?

Which leads us to this question: when will sovereign bonds yield real positive returns?


That's your answer GS, and you already knew that...

Crack up boom

Iconoclast421's picture

It is coming. But not today!

J J Pettigrew's picture

Free Beer Tomorrow (a sign in a saloon)....is the Fed's promise of "normalizing" rates...as they promote inflation...

The Real Tony's picture

Normalizing meaning a Fed funds rate of zero indefinitely.

Honest Sam's picture

Goin'  way way out on a limb here, but not tomorrow either. 

order66's picture

Let us know when it's the first longest. Because it will be.

Calculus99's picture

Americans are too obsessed with meaningless stats, like the stockmarket has never gone down on a Monday when a) the NY jets won by over 20 points on the Sunday, b) it was a full Moon, and c) the temp is NY was greater than 75.  

silverer's picture

Sorry. Pension systems can't tolerate a "corrected" number. Correcting will mean even shorter funds. Sorry, have to keep printing and cross your fingers (tighter and tighter).

FreeShitter's picture

It corrects when printing stops, it all ends when they can no longer borrow from the future to sustain the now.

Babs.St.Louis's picture

and who do you think controls that?  GOLDMAN! and the rest of the analysts in on the fix. 

FreeShitter's picture

Draghi, Abe, PBOC, and Old Yeller the old cunt control the printing.....

me123me's picture

Not going to happen anytime soon. The market will stay elevated until there is no talk of a crash. 

cameldojo's picture
"How Much Further?": Goldman Brags This Is The 5th Longest Streak Ever Without A 5% Correction
Babs.St.Louis's picture

Goldman is so currupt.  They proved it when they came out with a target for gold of 1370 when gold was almost at 1370. 

Shep Wave gave the target of 1370 when gold was at like 1100.  Goldman and Shepwave are all in on this together.  But we get signals earlier from SW since we are the little guy.  That has been my theory anyway and seems to be working sof ar. 

g3h's picture

Now we call 5% a correction.

How pathetic.

The Real Tony's picture

Ponzi's only implode they don't correct. The stock market today is a pure 100 percent ponzi.

J J Pettigrew's picture

HOWEVER, it is the FIRST longest streak with an UNBRIDLED FEDERAL RESERVE who has kept interest rates below the inflation rate for NINE YEARS!!!!!

and wishes to control every tick of the market with feigns and evasive rhetoric and promises of actions that are always excused away.

And a Federal Reserve that is probably a little long itself.....

Golden Breakout's picture

Just think about that... interest rates below REPORTED inflation for 9 years (which is complete bullshit as it is wildly understated)... gold should have gone through the fucking roof.

moneybots's picture
"How Much Further?": Goldman Warns This Is The 5th Longest Streak Ever Without A 5% Correction


An empty warning. Everything is upside down, now. Four more streaks to pass. The stock market has no relation to the economy. In October 2001, the recession ended. The stock market didn't bottom out until a year later. Myth had it that the market is suppposed to lead the economy by 6 to 9 months. It was 12 months behind.

JailBanksters's picture

So there has been 4 "longer" winning streaks in the past, this means what exactly ?

Thing is, who controls the destiny of these streaks, is it the Moms and Dads betting on how much money a company is going to make in the next 24 hours. Perhaps it's all those Sales People in Stores no longer selling anything that's pushing the prices up. Perhaps it's all the people that used to make stuff that is pushing the prices up.

You know who I think is pushing the prices up, Goldman.



moneybots's picture

 "During prior hiking cycles, equity P/E multiples typically fell but multiples have actually expanded during the past two years."


The meter is broken.


When the FED stopped QE, Japan and EU picked up the baton. Wasn't it recently noted that the BOJ owns 75% of Japanese ETF's?

mjcarr51's picture

Today's "earnngs number" isn't the same as years ago. PE's in 2017 can't be compared to histoical PE's. 


I'd love for a bunch of 60 - 80 year old CPS's to go into IBM or GE and come up with their "earnngs number".

mjcarr51's picture

BTW, I guarantee that the old guys # will not be lower than today's.

GreatUncle's picture

That's why the FED will CTRL-P soon enough at the moment it is positioning itself to pretend it is normal before the next crunch into -ve rates and moar QE. Got to look good and pretend for a short time you are trying to do something besides filling ones own pocket.

mjcarr51's picture

Ok, if they are able to keep this market levatiting and rally even 10 SPX point from here, I'm throwing in the towel.



YesWeKahn's picture

BOJ prints and buys sans limit.

Blue Dog's picture

Goldman Sachs is one part of the corrupt system along with the Federal Reserve. There's a revolving door going from them to the Democratic Party. John Corzine, former Democrat governer of New Jersey and Goldman Sachs head, stole $1.6 billion in segregated customer accounts at MF Global. It was ruled an accounting error. Gerald Celente said now he knows what the MF stood for!

The Real Tony's picture

About a ninety percent correction after Trump is out of office. Typical for any ponzi.

Fantasy Free Economics's picture

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When Goldman speaks it is to manipulate markets.

The Federal Reserve is under a political directive to protect and elevate stock prices.

Goldman will always be glad to help. This statement and others like it are to draw in shorts to be squeezed.


James Quillian

Fantasy Free Economics


GreatUncle's picture

"The Federal Reserve is under a political directive to protect and elevate stock prices."

You got to love it ... as ordinary people can't afford those prices and they know it so they can't lock into those economic gains being made and why in the end they will not care if stocks burn as they don't own any.

That's the fail of supporting stocks and not the economy as a whole whilst letting the population be economically crushed.

THEY WILL KNOW THEY HAVE BEEN ROBBED and do ask the FED how they intend to make it up to them? LOL they ain't so the anger will be here forever and growing as more and more are affected.

Bubble house prices were okay couple of decades ago when people could get on the property ladder not anymore as too many can't afford those prices!

mjcarr51's picture

AMZN down -13+

GOOG down  -13+


SPX down -5.


Rid i cu lous.

RDouglas's picture

What Goldman really said..... "We, the globalist bankers, in coordination with the deep state and msm, will be pulling the rug out from under the bullshit global economy soon. Elites need not worry, you will be escorted out the back Door of the burning ballroom when the party is over. Our scapegoat, Donnie the Dumbfuck is in place and already hated by 60% of Americans, so, remember to point the finger at him as the global tower of cards falls into its foot print. As usual there will be a bargain shopping party open only to 1%'ers in the weeks following the collapse, meantime looong pitchforks and torches."

swissthinker's picture

Keep it running until it's the longest, then make a 1% correction



YourAverageJoe's picture

There will be very sad bag holders.