As major U.S. stock indices fall into or near bear market territory, defined by a 20% drop from recent highs, Goldman Sachs (GS) provided some context on what this downturn could mean. The investment firm noted that not all bear markets are alike and can be categorized as structural, cyclical, or event-driven. According to Goldman, the current market weakness falls into the event-driven category.
The bank identified “Liberation Day” and the steep rise in tariffs as the key triggers for this event-driven bear market. However, Goldman warned that this type of decline could shift into a more prolonged, cyclical bear market if recession risks continue to grow. While both event-driven and cyclical bear markets can see drops of about 30%, event-driven ones usually recover faster.
Still, Goldman Sachs said investors should be cautious. The market may have more room to fall, as this morning’s rally turned out to be a short-lived bear market rally. These temporary rebounds are common during downtrends and may not signal a true recovery just yet. Indeed, just like “Liberation Day” triggered the downturn, the markets will need a positive catalyst in order to truly turn things around. However, investors have, so far, been burned each time they thought a positive development from Trump was coming, as he continues to deliver negative surprises.
Is SPY a Buy Right Now?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on the SPDR S&P 500 ETF Trust (SPY) based on 408 Buys, 88 Holds, and eight Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average SPY price target of $680.11 per share implies 37% upside potential.
