Goldman Sachs lifts its downside target for the S&P 500, and lays out 4 risks to its forecast

The bank’s strategists said risks of economic or political interruptions suggest that “near-term returns are skewed to the downside, or neutral at best.”

While they described the index’s recent performance as “remarkable,” they also said the upward trajectory of US equities in the last two months is unlikely to persist.

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Kostin’s team laid out four macro risks to their forecast:

• Medical. A successful anti-viral therapeutic or vaccine could represent an upside catalyst, while a second wave of coronavirus infections could send the index lower.
• Economy. Limited rehiring, elevated corporate leverage, and adoption of zero-based budgeting by companies could restrain economic recovery.
• US-China tensions. Disruptions to trade between the two countries could weigh on the index.
• November 2020 US election. “Prediction markets currently assign a 78% probability the Democrats control the House of Representatives, a 51% likelihood of occupying the White House, and a 48% probability of controlling the Senate,” the strategists wrote.

Read more: Famed economist David Rosenberg says investors are falling into a classic market trap that’s historically preceded a further meltdown — and warns ‘there’s not going to be much of a recovery’