Experts at investment bank Goldman Sachs warned of serious fluctuations in financial markets, which could potentially provoke both the emergence of the coronavirus vaccine and the failure of its trials.
In the first case, GS analysts note, the S&P 500 index is capable of rising to 3700, and in the second, it can fall to 2200 points. This forecast made experts feel wary.
Index growth factors
In its report, Goldman Sachs writes that investors are paying insufficient attention to the potential for successful vaccine trials. If this does happen, then market trends will change faster than expected. Bonds will be the first to suffer and will be disposed of. Then funds will accumulate in the shares of traditional cyclical companies and banks, leaving the technology sector. The latter is likely to lose its leadership.
A factor such as the US presidential election will have an additional impact, according to Goldman Sachs. The potential loss of the incumbent White House along with the good news about the vaccine will push up emerging market stocks.
Analysts say that under such circumstances, the S&P 500 index could rise to 3700 points.
Index decline factors
If all of the above circumstances do not add up to a single picture, and in addition to everything, the second wave of coronavirus will rage stronger than expected, then Goldman Sachs does not exclude a potential drop in the S&P 500 index to 2,200 points.
Morgan Stanley, represented by analyst Michael Wilson, warned about the possibility of negative developments even earlier, the very one who correctly predicted the market situation in March this year. Earlier this month, he talked about the possibility of reducing the S&P 500 by 10%. True, he focused on the fact that after such a correction, growth can resume, while demonstrating a healthier and broader character. The prerequisites for the resumption of growth, as per Wilson, is the economic recovery and the growth of corporate profits.
However, it is not known how the so-called "August curse" will affect all the forecasts made above. Recall that over a decade and a half, the S&P 500 has always declined in the last month of the summer. The average decline over the years was 0.4%. But the uniqueness of this year's situation, some analysts believe, could break the traditional "August trend". Experts are already saying that the market volatility is lower than that which usually accompanies the corporate reporting season.
Influence of the virus
The corona crisis is exerting tremendous pressure on the global economy. However, the S&P 500 index specifically did not always meet the expectations of experts monitoring the impact of the pandemic on the financial market. The first news about COVID-19 recorded a growth of about 3%, which then fell sharply in February-March by 34%, and from March 23 it gradually increased, which it continues to do to this day, by 42%.
The coronavirus has had a direct impact on Goldman Sachs as well. Investbank in the second quarter of this year showed 41% in revenue over the same period last year of more than $ 13 billion. This is the second largest quarterly income of the bank in history.