S&P 500 to rebound: Three things to watch out – Goldman Sachs

According to the analysts at Goldman Sachs, the US stock markets are likely to rebound and end the year higher by about 20% when compared to the current levels.

The bank noted: “Strategically, we continue to expect the S&P 500 will rise to 3,000 by year's end.”

Tactically, however, we believe it is likely that the market will turn lower in the coming weeks, and caution investors against chasing this rally,” the analysts cautioned.

The US banking giant was quick to that there three things to watch out for to confirm the US equity markets have bottomed out.

“The viral spread in the United States must begin to slow so that the ultimate economic impact of the virus and containment efforts can be understood.

There must be evidence that "extraordinary measures" taken by the Federal Reserve and Congress to support the U.S. economy are sufficient. While the willingness of policymakers to use all the tools at their disposal is clear, only time will tell to what extent the actions succeed in limiting defaults, [business] closures and layoffs.

Investor sentiment and positioning must bottom out. Goldman analysts point to their U.S. Equity Sentiment Indicator, which combines nine measures of equity positioning, noting that it has only declined by 1.4 standard deviations, versus standard deviations of between -2 and -3 in recent corrections.”

The main indices on Wall Street settled Monday, with over 3% gains. S&P 500 jumped 3.35% to 2,626 points, Dow 30 rallied 3.20% to 22,327 while NASDAQ leaped 3.62% to 7,774.50.