US: Investors are increasingly concerned about an S&P drawdown – Goldman Sachs

Analysts at Goldman Sachs explain that as the hopes for US policy changes now appear less likely, leaving the S&P index hovering just under 2400, investors are wondering whether economic activity can catch up to sentiment and support another leg higher in asset prices.

Key Quotes

“The 10% rise in the S&P index since the US election was catalysed by a surge in optimism surrounding US policy.  While the hoped-for policy changes now appear less likely, ‘soft’ data have shown continued strength, leaving the S&P index hovering just under 2400 as investors wonder whether economic activity can catch up to sentiment and support another leg higher in asset prices.  While opinions on that question remain split, what is clearer is that, as investors continue to wait for the global economy to ‘show me the activity’, they have become increasingly nervous about the prospect of a large, sharp S&P drawdown: the VIX index, which had remained around 12 through much of 2017Q1, now stands close to 15.”