CoinDesk Reports:
Driven by large-cap tech stocks, the US stock market has continued to rise this year. However, analysts at Goldman Sachs recently cautioned investors that the risk of a stock market pullback is increasing, prompting timely hedging strategies to mitigate potential market risks.
Throughout this year, major tech stocks such as Nvidia and Apple have propelled the US stock market to consecutive highs, with the S&P 500 index setting a record high 31 times.
Nevertheless, in a recent report, Goldman Sachs highlighted growing risks of a stock market pullback, suggesting now might be a prudent time for investors to apply caution and employ corresponding hedging strategies to hedge against risks.
Goldman Sachs Analysts: Three Factors Bearish on US Stocks
Analysts pointed out increasing risk factors, including:
– The continuous expansion of the US deficit, which is expected to reach $1.9 trillion this year, up by $400 billion from estimates four months ago;
– Retail and institutional investors continuing to increase exposure to stocks;
– Unlike Q1, the momentum in Q2’s US stocks has been mainly driven by a few stocks, historically indicating increased concentration in gains and corresponding risks of pullbacks;
– US GDP growth is expected to slow from 4.1% in the second half of 2023 to 1.7% in the first half of 2024, with the unemployment rate rising from 3.5% to 3.8% based on a three-month moving average. Goldman Sachs noted that with declining real income growth and softened consumer sentiment, the economy is expected to continue experiencing weak growth.
Therefore, Tony Pasquariello, Global Head of Hedge Fund Business at Goldman Sachs, recommended:
Given the current low cost of hedging, investors can hedge their investments through tools such as put options while maintaining high-quality holdings.
With the global election cycle unfolding, market volatility may gradually rise. Currently, the 10-day volatility of the S&P 500 index stands at only 5%, indicating extremely low levels.
However, Tony Pasquariello also clarified that his warning does not imply investors should exit the market but rather urges them to exercise caution and discipline. He emphasized:
Significant sell-offs are rare as long as economic and corporate earnings continue to grow.
JPMorgan: S&P 500 Index Expected to Drop to 4,200 Points by Year End
In contrast to Goldman Sachs’ cautious view, JPMorgan analyst Marko Kolanovic, known as one of the most bearish experts on US stocks, predicts the S&P 500 index will drop to 4,200 points by year-end:
The S&P 500 is expected to plummet 23% from current levels to 4,200 points by year-end.
Could Bitcoin be Dragged Down by the US Stock Market?
Due to Bitcoin’s correlation with the US stock market reaching its highest level in 18 months in June, the 30-day correlation coefficient between Bitcoin and the Nasdaq rose to 0.64 for the first time since early 2022.
Therefore, if a significant stock market correction occurs as experts suggest, it could potentially trigger continued selling of Bitcoin. Investors should proceed with caution.