Goldman Sachs Forecasts New Stock Market Highs Over Next 4 Weeks, But Warns Of 'Worst Two Week Trading Period Of The Year' Immediately After

Goldman Sachs has predicted that the stock market will hit new highs in the next four weeks, followed by a potential downturn. Investors are advised to be cautious around a specific date in mid-September.

What Happened: The trading desk at Goldman Sachs has projected a period of record highs in the stock market over the next four weeks, followed by a potential downturn, reported Business Insider.

This forecast comes amid a low volatility environment and an increase in corporate buybacks, which are driving Goldman’s optimistic outlook until mid-September.

Scott Rubner, managing director at Goldman Sachs, highlighted the low volatility markets that typically favor stock prices during the end of summer weeks, according to the report. This new low volatility environment follows a significant decline in the CBOE Volatility Index, representing the largest 9-day drop in Wall Street’s fear gauge on record.

Rubner also pointed out that professional trend followers who were shaken out of stocks during the early-August sell-off are likely to return to buy mode. He also noted that companies with authorized share buyback programs will be buying stocks over the next few weeks.

Rubner also mentioned that companies with authorized share buyback programs will contribute to stock purchases until a corporate blackout window begins on Sept. 13. He estimates around $1 trillion in stock buybacks this year.

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Rubner advised caution after Sept. 16, citing historical volatility in the second half of September. “2H of September is the WORST TWO WEEK TRADING period of the year,” he said.

He predicts a surge in stocks over the next four weeks, followed by a period of negative volatility in the second half of September. However, he still anticipates the stock market to end the year at record highs.

Why It Matters: This forecast comes after a series of significant market events. In May, Goldman Sachs predicted that the stock market rally for 2024 had peaked, with a flat return expected for the rest of the year. However, recent economic data has shifted sentiment.

In August, equity markets rebounded sharply following a sell-off triggered by weaker-than-expected economic data. The S&P 500 and Nasdaq 100 recovered significantly, easing recession fears.

Additionally, in mid-August, Goldman Sachs revised its U.S. recession forecast, reducing the probability of a recession within the next 12 months to 20%.

Rubner also anticipates that the stock market will end the year at record highs, with significant gains expected in November and December. He projects the S&P 500 could reach 6,000, representing a 7% increase from current levels.

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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote