- Stocks are more likely to dip than rally further in the short term, Goldman Sachs says.
- The ceasefire-fueled relief rally has increased the odds stocks will pull back, the bank said.
- The analysts cautioned investors trying to ride the rally higher against adding risk assets.
Stocks could be set up for a pullback after the relief rally brought the market back to all-time highs, Goldman Sachs says.
Investor shifted back to risk-on after Trump announced a temporary US-Iran ceasefire agreement on April 8, fueling a relief rally that not only erased Iran war losses, but led to fresh record highs for the S&P 500 and Nasdaq. Since then, Trump announced an extension of the ceasefire just before its expiration until the Iranian leadership submits a proposal or discussions conclude.
US stocks opened Wednesday's trading session higher on the news, but Goldman cautioned that equities are likely to see a downturn before more gains extend much further.
The analysts warned clients against adding risk to their portfolio as the odds of another dip in stocks are more likely than a surge higher.
"Based on our equity asymmetry framework the risk of another equity drawdown remains elevated and the potential for a rally remains low, indicating a poor asymmetry to add risk," they wrote.
The analysts highlighted the potential sell-off as a reason for investors to avoid risk assets, not as a shift in their overall expectations for equities.
The firm maintains its bullish outlook for stocks in the longer term. Goldman, unlike other firms, kept its 2026 year-end S&P 500 target, which sits at 7,600, unchanged since the start of the war in Iran.
In the short term, Goldman said theIran war energy shockhas increased the risk of a stock pullback, especially after the recent relief rally.
"Due to the lingering energy shock from the Middle East war, the business cycle outlook has now deteriorated, which makes fading drawdown risk more difficult, especially with valuations rebounding," they analysts wrote.
Goldman sees the chances of stocks dipping to be more probable than a rally, but noted that an end to the war in Iran would provide lasting support for risk assets.
The post Goldman warns that the risks of another stock dip are high after the rapid relief rally appeared first on Business Insider
