GSBulletIn: « Correction…FINALLY »

6 février 2018
Correction… FINALLY! In our 2018 outlook we anticipated “one or two short-lived but very nasty corrections of 10% or more” and we named as a potential […]
 

Correction… FINALLY!

  • In our 2018 outlook we anticipated “one or two short-lived but very nasty corrections of 10% or more” and we named as a potential trigger “Artificial intelligence, algorithms and high frequency trading systems transforming a smaller correction into a flash crash by simultaneously generating ever more selling orders.”
  • That’s what must have happened yesterday. Apart from some inflation fears – which ironically didn’t have an impact on fixed income – there is no fundamental reason for such a sudden sell-off. Growth in all OECD countries, strong earnings, lower taxes in the U.S. … all still valid.
  • Corrections are “healthy” and we all know that this one was largely overdue; we just couldn’t know when it would kick in, and we can’t know where it bottoms. So let’s be grateful that it finally happened and consider it an opportunity rather than a reason of concern.
  • Of course, there may still be some “after quakes” which is why we would keep a little bit of powder dry and “buying-now-and-on-further-dips” may well be the best approach from here. By the way, we see no reason (yet) to alter our year-end targets of 3’000 for the S&P 500 and of 4’300 for Eurostoxx from our 2018 outlook.
 

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