The start of 2025 has brought a sharp uptick in equity drawdown risks, with Goldman Sachs estimating a near 30% probability of market corrections, fueled by surging policy uncertainty and shifting inflation dynamics.
In a note published Wednesday, analysts Andrea Ferrario and Christian Mueller-Glissmann highlighted heightened risks stemming from rising inflation pressures, trade tensions and political uncertainty ahead of Donald Trump’s second presidential term, set to start on Jan. 20, 2025.
The analysts indicated that these factors could lead to deeper market volatility and weaker forward returns for equities.
What Is Driving The Increased Risk?
Goldman’s framework shows the probability of an equity drawdown has jumped to nearly 30%, a significant rise from levels seen in 2024. Historically, when drawdown risk crosses this threshold, markets have experienced lower returns and, in some cases, severe corrections.
Goldman indicates that extreme outcomes are more likely if the probability exceeds 35%.
One of the primary drivers of this heightened risk is the resurgence of inflation, which has shifted from negative …Full story available on Benzinga.com
Goldman Sachs Flags Market Correction Risk As Inflation, Trump Policies Stir Uncertainty
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