Goldman says recent investment flows suggest limited upside for S&P 500 By Investing.com

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Goldman says recent investment flows suggest limited upside for S&P 500

Published May 23, 2023 06:14

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Goldman says recent investment flows suggest limited upside for S&P 500

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US500

-1.47%

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Goldman Sachs analysts weighed on the importance of investment flows and their relationship with equity returns. They highlight the importance of the strong ETF inflows in past years, which acted as “a powerful driver of equity upside.”

However, analysts also note that these flows “have slowed significantly over the past few months,” which may suggest the limited S&P 500 upside.

“The S&P 500 return has been 7% stronger than investment flows over the past two months. Weak recent investment flows suggest a headwind for equities over the coming weeks,” they said in a client note.

Goldman’s multi-year analysis shows that S&P 500 daily returns are positively correlated with flows.

“We believe the expansion or contraction in available assets is the primary driver of flows and equity markets,” analysts added.

Bottom line, Goldman sees an 18% probability the S&P 500 trades down more than 5% over the next month.

“We see puts as more attractive in 95% of the months over the past 27 years,” the analysts concluded.

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