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31.10.2022 03:13 PM
Goldman Sachs Group predicts a fall in the US stock market by another 25%

While the US stock market is gradually cooling down from the rally observed last week, strategists from Goldman Sachs Group Inc. believe that the conditions for stopping the fall of the US stock market have not yet been created. GS said that no US assets tracked by Goldman fully include the likelihood of a recession. Only the Fed's "harshest and most hawkish" approach to interest rates is embedded in stocks, but not the recession itself.

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In a serious economic downturn in the US, the Goldman team expects the S&P 500 index to fall to $2,888, which means a drop of another 25% compared to last week.

The S&P 500 index is currently up 8% since October 12, when it closed at its lowest level since November 2020. Traders are somewhat optimistic about Treasury bonds as they begin to reconsider expectations of maintaining further aggressive Fed policy. Wall Street economists estimate the probability of a recession in the coming year at 60% compared with 50% a month earlier.

It is worth saying that the views of experts from GS differ from the opinions of colleagues from Citigroup Inc. and JPMorgan Chase & Co. They said that bounces from the observed bottom mean that the recession is gradually taking into account prices.

Premarket

Petrobas, shares of the Brazilian state oil company fell by 8.5% in the premarket after Luiz Inacio Lula da Silva defeated Jair Bolsonara in the Brazilian presidential election.

Shares of Hanesbrands, a clothing manufacturer, were revised down by Wells Fargo Securities, which lowered the stock's rating to "below market" from "above market." Wells Fargo is concerned about the state of the company's debt and obstacles to business, which, in its opinion, are largely beyond the control of management. Hanesbrands shares fell 3.8% in premarket trading.

Following Hanesbrands, Paramount Global's rating was revised negatively. The media company's shares were downgraded to "below market" from "equivalent." A few weeks ago, Wells Fargo Securities downgraded its rating to this level, initially stating that the downgrade occurred amid concerns about losing rights to sports broadcasts and programs. Paramount Global shares fell 3.7% in premarket trading.

Caterpillar, a manufacturer of heavy equipment and machinery, lost 1.2% in the premarket after UBS downgraded the stock to "neutral" from "buy." UBS said the downgrade reflects a more balanced risk and reward profile but remains optimistic about Caterpillar's long-term prospects.

As for the technical picture of the S&P500, the day did not start very well after Friday's growth. The main task for buyers now is to protect the supports: $3,861 and $3,835. As long as trading is conducted above these levels, we expect continued demand for risky assets. This will also create good prerequisites for further strengthening the trading instrument and returning $3,905 under control, just above which the level of $3,942 is located. Only such a scenario will strengthen the hope for an upward correction with an exit to the resistance of $3,968. The furthest target will be the $4,000 area. In case of a downward movement, buyers must declare themselves in the area of $3,861. A breakdown of this range will quickly push the trading instrument to $3,835 and $3,808 and open the possibility of updating the support of $3,773.

Jakub Novak,
Analytical expert of InstaForex
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