Risk of a Drawdown Rising

Forecasts for upcoming dips that are to be bought (if you believe in Goldmans forecast). Historically markets rally into the year end. 2014 will start with another move to the north and then we get the seasonal selling in May. Could it really be that easy.

“Drawdown risk is rising after a rally with no correction. The S&P 500 has soared 26 % YTD. The median expected drawdown equals 6 % in the next three months and 11 % during the next 12 months. We estmimate a 67 % probability of a 10 % drawdown at some point in 2014.” (Goldman Sachs)

There has been amazing inflows into equity funds in general, during 2013 and especially during the second half of the year. Historically, I would say that this increases the risk of a larger move than in the normal case.

Risk (1)

Personally I think there will be plenty of opportunities going forward to question Goldman’s forecast.

S&P 500 EPS & Price

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s