S&P 500 Rally At Risk As Valuation Hits 99th Percentile: Goldman Sachs

As a shift in investor perceptions of various risks could trigger a drawdown, analysts at Goldman Sachs anticipate that the S&P 500 index will end 2016 roughly 3% above its current level at 2100. David J. Kostin and colleagues consider in their May 13 “US Weekly Kickstart” note whether due to the variety of risks, one should revisit the adage “sell in May and go away.”

Drawdown during next few months could pull S&P 500 index down

Kostin and team note that implied volatility as measured by the VIX averaged 23 during the first two months of the year before retreating below 15 in May. They say equity investors seem complacent rather than bullish about the near-term prospects for U.S. stocks.

The GS analysts anticipate...