Goldman Sachs' top equity strategist worries markets have rallied 'too far too fast,' and is predicting a fresh plunge

Peter Oppenheimer

  • Goldman Sachs' chief global equity strategist Peter Oppenheimer says equity markets have risen "too far too fast" in the past couple of weeks.
  • He predicts a further drop in global stocks in the short term, before markets recover in the second half of the year.
  • "There are probably still downside risks from here," he said, before adding that Goldman expects to see a "strong sequential recovery" at the end of 2020.
  • Read more on Business Insider.

Markets have recovered some of the losses seen since coronavirus fears spooked investors, but Goldman Sachs' chief global equity strategist thinks these gains have been premature and that stocks will drop again before they can stage a true recovery.

"This rally in equity markets is probably too far too fast, and there are probably still downside risks from here," Peter Oppenheimer, Goldman's number one stock strategist, said on a call Thursday. Markets Insider has heard a recording of the comments.Advertisement

He explained global slowing of coronavirus infection rates and growing fiscal interventions from governments have reduced some of the tail risks that investors were fearing a few weeks ago and helped explain the rally that is seen in equity markets.

He warned, however, that a correction may be imminent and a significant price crash could be on the horizon.

Oppenheimer struck a more positive tone on the medium term, saying that he thinks investor appetite for riskier assets will rise in the second half of the year, as he expects a strong recovery in economies in the second half of 2020.

"We do believe we will see a strong sequential recovery in the economy and in profits from a very low base, starting in the second half of this through to next year," he said.

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Investors have already experienced severe market turmoil over the last month due to rising tensions over coronavirus, suffering wild swings, and market volatility not seen in more than a decade as investors scrambled to make sense of the virus' likely economic impact. Advertisement

The S&P 500 has shed roughly 16% since mid-February thanks partly to the virus, and also the ongoing oil-price war between Saudi Arabia and Russia.

Coronavirus has caused more than 138,000 deaths and infected over 2 million people worldwide, according to data compiled by Johns Hopkins University.

Oppenheimer's comments affirm that the path to economic recovery is likely to be less of a "V shape" and more challenging than some investors expect.Advertisement

Legendary emerging markets investor Mark Mobius voiced similar concerns Wednesday.

Mobius, the founder of the eponymous Mobius Capital, predicted markets will thank further before they rise as banks begin posting their earnings during a tumultuous time.

Mobius doesn't think stocks have hit an "absolute bottom" yet and investors should hold "dry powder".Advertisement

This typically refers to increasing liquidity, with holding cash being one option.

Goldman Sachs, JPMorgan, Citi Bank, Bank of America and Morgan Stanley are some of the big players who posted earnings this week.

Goldman Sachs profits fell 46% last quarter due to the economic fallout from coronavirus. Advertisement

The current economic shutdowns have caused unemployment to soar worldwide and most economists expect a recession in the second half of the year.

US weekly job claims hit 5.2 million Thursday, erasing more than a decade of jobs created. Get the latest Goldman Sachs stock price here.Advertisement