Goldman Sachs warns S&P 500 momentum rallies near highs may signal weaker returns
Goldman Sachs strategists said the S&P 500's momentum-led rallies near record highs are signaling weaker returns in the period ahead. Their note found that historic episodes of this kind have on average been followed by softer six-month performance. For Latin American markets, that means caution on US-linked capital flows.
In a fresh note to clients, Goldman Sachs said that even as the S&P 500 trades in a narrow band near record highs, momentum signals are pointing to overheating. The team led by chief US equity strategist David Kostin examined comparable historical setups and found average six-month returns running below the long-run mean.
For Latin America, the practical implication is a likely slowdown in cross-border capital flows. Brazil's Bovespa and Mexico's IPC have moved this year with high correlation to Wall Street. A loss of momentum in the US can in turn dampen emerging-market equity inflows.
Investors are also watching the bond side. Rising US 10-year yields and inflation surprises continue to squeeze risk appetite. Goldman's note argues that keeping equity exposure broadly steady, while tilting toward defensive sectors and low-volatility stocks, may be a reasonable hedge for the coming months.
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