A note on Wednesday from Goldman Sachs reiterates the firms projection for the S&P500 to rise to 4,500 by year-end 2023 and to 4,700 in 12 months.
Goldman Sachs do, however, add a but. Analysts at the firm acknowledge that some portfolio managers expect a recession to begin within the next year. While GS economists put that probability at 25%., the analysts do offer 5 reasons why to add downside protection:
- put-call skew indicates that upside positioning is crowded and downside protection is attractively priced
- the “narrow market rally suggests drawdown risk is elevated.”
- equity valuations are elevated
- equities are already pricing an optimistic economic growth outlook
- positioning is no longer being a tailwind to U.S. equities
(Reason 6 is the spread GS will take on selling downside protection to you but I better not say that)