The Bear Necessities
The desk posits that market participants are overly focused on identifying the peak of the current bull market, which has spanned nearly a decade, rather than preparing for a possible downturn. As highlighted by Goldman Sachs in their commentary, recognizing the onset of a bear market is crucial for mitigating risks associated with prolonged market highs. Recent trading patterns and investor sentiment suggest that uncertainty about the bull market's longevity is creating opportunities for strategic positioning amidst potential market corrections, reinforcing the importance of a proactive stance.
What the desk is arguing
The desk argues that the ability to identify a bear market promptly may be more significant than determining the ultimate peak of the current bull market. Per the full note from Goldman Sachs, there is a prevailing attitude among investors questioning the resilience of this bull market, which has been characterized as 'unloved' due to underlying economic uncertainties.
Supporting this view, a historical analysis of bull and bear market durations suggests that prolonged periods of growth often end in sharp corrections. Specifically, Goldman highlights that once a bear market is recognized, timely decisions can prevent significant capital erosion and take advantage of market volatility.
Where it sits in our coverage
Our current consensus target for the EUR/USD stands at 1.075, with a target range spanning from 1.04 to 1.12. For example, jpmorgan aligns with our view at a target of 1.10 by March 2026, while bofa expresses a divergent perspective, suggesting a lower target of 1.04 for the same period.
This view aligns closely with the broader sentiment among traders who expect potential corrections in the near term, placing our outlook toward the upper boundary of the consensus spread.
How other firms see it
In alignment with our perspective, jpmorgan and several other firms share a bullish forecast for the Eurozone, anticipating a resilient currency supported by economic recovery. Conversely, bofa remains skeptical, holding a more conservative stance on the Euro's strength as they predict a bearish scenario.
The performance of the EUR/USD is particularly relevant in this context as traders should watch for Eurozone economic indicators that could signal shifts in sentiment, especially in light of the anticipated ECB policy discussions.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01The current bull market is seen as 'unloved', raising concerns about its sustainability.
- 02Timely identification of a bear market could mitigate risks significantly for investors.
- 03Consensus targets for the EUR/USD suggest mixed sentiment across major banks.
- 04Market volatility may present opportunities for strategic positioning.
Market implications
Traders should focus on the important level of 1.075 for EUR/USD as a potential pivot point. Monitoring upcoming economic data from the Eurozone could provide insights into market sentiment and potential reversals in this trend.
Risks to this view
Should central bank policies shift unexpectedly, or if there is a significant macroeconomic surprise, it could prompt a rapid valuation change. A drop below 1.04 in EUR/USD could indicate stronger bearish sentiment, invalidating the current bullish outlook.
Eight years into the "most unloved" bull market in history, many investors are asking how much longer the upswing can last. Peter Oppenheimer, chief global equity strategist for Goldman Sachs Research, discusses why identifying the peak may be less important than recognizing a bear market once it starts, and what history can tell us about the types and tenures of these declines. This podcast was recorded on October 16, 2017.
All price references and market forecasts correspond to the date of this recording. This podcast should not be copied, distributed, published or reproduced, in whole or in part. The information contained in this podcast does not constitute research or a recommendation from any Goldman Sachs entity to the listener.
Neither Goldman Sachs nor any of its affiliates makes any representation or warranty, as to the accuracy or completeness of the statements or any information contained in this podcast and any liability therefor (including in respect of direct, indirect or consequential loss or damage) is expressly disclaimed. The views expressed in this podcast are not necessarily those of Goldman Sachs, and Goldman Sachs is not providing any financial, economic, legal, accounting or tax advice or recommendations in this podcast. In addition, the receipt of this podcast by any listener is not to be taken as constituting the giving of investment advice by Goldman Sachs to that listener, nor to constitute such person a client of any Goldman Sachs entity.
Copyright 2017 Goldman Sachs & Co. LLC. All rights reserved.
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Sources & References
How we cover this story
Primary source
The Bear Necessities