Analysts at Goldman Sachs, led by Andrea Ferrario, believe that U.S. stocks are unlikely to enter a bear market over the next 12 months, as economic recovery continues to bolster the stock market. The team assesses that the risk of a market drop exceeding 20%, which would indicate a bear market, stands at only 18%, despite potential risks associated with the presidential election.
The S&P 500 has risen approximately 20% this year, following a nearly 25% surge in 2023, driven primarily by large tech stocks. The rally has been supported by signs of U.S. economic recovery, although concerns about the extent of the Federal Reserve’s easing cycle and election uncertainties have contributed to higher bond yields this month.
Goldman Sachs strategists noted in a report that as long as economic growth remains robust, the stock market should be able to handle increased bond yields. However, they cautioned that significant market volatility might occur following the presidential election.
Despite recent signs of weakness, such as October's job growth slowing to its lowest level since 2020 due to major hurricanes and strikes, and challenges in reducing inflation, the economic environment remains favorable. The U.S. economy continues to expand at a solid pace in the third quarter, maintaining a trend of strong growth for several consecutive quarters, with unemployment rates staying low.
