March 4 (Reuters) - Goldman Sachs sees "correction risks" to global stocks in the near term due to worries about geopolitics, AI disruption and elevated valuations, though the Wall Street bank sees
Goldman Sachs Expects Correction Risks for Global Equities but Not Bear Market
Goldman Sachs' Outlook on Global Equities and Market Risks
Correction Risks and Market Valuations
March 4 (Reuters) - Goldman Sachs sees "correction risks" to global stocks in the near term due to worries about geopolitics, AI disruption and elevated valuations, though the Wall Street bank sees limited room for a bear market.
"We see correction risks as high given current valuations, but expect this to present a buying opportunity with relatively low risk of a more protracted and deep bear market," Peter Oppenheimer, chief global equities strategist at Goldman Sachs, said in a note on Wednesday.
Definitions: Bear Market vs. Correction
A bear market is confirmed when an index closes at least 20% below its most recent record high finish, according to a widely used definition. It confirms a correction if the index closes 10% or more below that level.
Key Factors Impacting Global Equities
Geopolitical Tensions and AI Disruption
Global equities have been rattled since the start of the year by fears of AI disruption to businesses, massive AI spending from Big Tech and most recently, the Middle East conflict.
Impact of U.S.-Israeli Air War Against Iran
The U.S.-Israeli air war against Iran has heightened fears of an oil price shock, higher inflation and economic uncertainty. That, combined with elevated equity valuations, has prompted investors to shun risky assets in favor of safer ones.
Recent Market Performance
The MSCI's All Country World Index, a gauge for global equities performance, declined for a fifth straight session on Wednesday, and was down about 4% from its record high. The benchmark S&P 500 is down 0.4% so far this year.
Goldman Sachs' Recommendations and Market Outlook
Positive Earnings and Diversification Strategy
Robust earnings growth, particularly in the U.S. and emerging markets, and potential for strong economic growth will keep risks low for a deeper bear market, Oppenheimer said.
"We continue to recommend broad geographical, factor and sector diversification as a way of improving risk adjusted returns," Goldman added.
Reporting Credits
(Reporting by Kanchana Chakravarty in Bengaluru; Editing by Devika Syamnath)
