Goldman Sachs is waving a purple flag for international equities because the S&P 500 (SPY) edges nearer to a full-blown correction, now down greater than 9% from its February excessive. Analysts warn that if the selloff extends past 10percentand if U.S. progress considerations, not simply tech-driven volatility, are fueling the declinemarkets worldwide might take a success. Taking a look at previous corrections since 1990, Goldman discovered that international indexes have sometimes tumbled wherever from 16% to 21% in response to deep S&P 500 drawdowns. Whereas traders would possibly hope for a special final result this time, historical past suggests in any other case.
However not all markets are feeling the identical strain. The STOXX Europe 600 continues to be holding a 5.8% achieve for the 12 months, whereas Hong Kong’s Grasp Seng Index has surged 17%. Goldman’s Peter Oppenheimer sees a case for Europe and different worldwide markets to outperform the U.S. if their economies maintain up higher. However there is a catchthose “low cost” valuations exterior the U.S. will not be as engaging as they appear. Whereas they commerce at a reduction in comparison with U.S. shares, they don’t seem to be essentially low cost by their very own historic measures, which means traders banking on a valuation cushion would possibly must rethink their technique.
For these seeking to hedge in opposition to additional draw back, worldwide ETFs supply a technique to diversify past U.S. markets. Nevertheless, the query stays: will these markets proceed to indicate power, or is one other synchronized selloff on the horizon? With commerce tensions, recession fears, and tightening monetary situations all in play, traders ought to brace for turbulence.
This text first appeared on GuruFocus.
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