The recent selloff on the US stock market could be coming to an end, if history is any reference according to strategists at Goldman Sachs Group Inc. and Deutsche Bank AG.
Its magnitude has coincided with a “typical” sale of the S&P 500 since the financial crisis, albeit at a faster pace, a Goldman team, led by David Kostin, wrote in a comment Friday. And the positioning of options – the core of the weakness – has normalized, his colleagues at Deutsche, including Srineel Jalagani, noted the same day.
“Despite the strong selloff last week, we remain optimistic about the trajectory of the US stock market in the coming months“wrote Goldman analysts.” Since the financial crisis, the typical S&P 500 pullback of 5% or more has lasted 20 trading days and has been 7% from peak to low, matching the magnitude of the pullback. latest, if not speed. “
A Revaluation of historically high equity valuations and volatility in the options markets has caused the S&P 500 to fall approximately 7% from its record close on Sept. 2, although it maintains an increase of almost 50% compared to the minimum in March. The Nasdaq 100 is down 11%, after investors questioned whether the rally of the high-tech indicator could be excessive.
For their part, the Deutsche team focused on the impact on the options market, using a measure that looks at the number of contracts that are bearish relative to bullish ones. The ratio fell to the bottom of a 10-year range, indicating an extreme level of positive outlook, the team said.
“Historically, put-call corrections have impacted the market acutely, but the impact was short-lived,” the strategists wrote.
However, both teams noted that the US elections were a major source of uncertainty for future markets.
“Investors have yet to deal with the next macro event of the US presidential elections,” warned Deutsche strategists. “With a probably unprecedented volume of mail-in votes, the outlook for post-Election Day volatility remains high.”