Goldman Sachs thinks a big correction is coming. So far, investors aren’t buying it

May 12, 2020, 9:00 AM UTC

This is the web version of the Bull Sheet, Fortune’s no-BS daily newsletter on the markets. Sign up to receive it in your inbox here.

Good morning. Equities are trading sideways as mixed data on the recovery gives investors pause. Goldman Sachs, meanwhile, thinks we’re headed for a correction.

Let’s check in on the action.

Markets update


  • The major indices are in the red. Japan’s Nikkei is down 0.1%.
  • “No V-shaped rebound” for China. That’s the prognosis of one analyst after disappointing PPI numbers showing China’s factories are suffering from weak domestic and international demand.
  • Saudi Aramco, the world’s most profitable company, reported a Q1 profit of $16.7 billion this morning, that’s a 25% y-o-y drop. Even with rock-bottom oil prices it’s committed to pay out $18.75 billion in dividends for Q1.


  • European bourses opened slightly lower, before climbing in the first hour of trade. London and Milan were leading the way.
  • The fight over state aid for airlines could get ugly. Budget flyer Ryanair is suing to stop the French government bailing out Air France-KLM.
  • “Could it be peak oil? Possibly. Possibly. I would not write that off.” That’s BP CEO Bernard Looney who is still unsure whether demand for crude will ever return to pre-pandemic levels.


  • The Dow, S&P 500 and Nasdaq futures are pointing to a negative open but are gaining some ground.
  • The Nasdaq extended gains into a second week on Monday, pushing the index above 2% YTD.
  • Long expected, today the Fed begins buying corporate debt—including eligible ETFs—from investors. What will it buy? U.S. investment-grade corporate bonds as well as U.S. high-yield corporate bonds.


  • Gold and the dollar were up early, but once investors jumped back into equities the two fell.
  • Crude is higher. WTI and Brent are climbing again today after Saudi Arabia yesterday announced it would cut production by a further 1 million barrels per day.

The FOMO rally

The Nasdaq rally stands at six straight days. But you have to look at the S&P 500 to best understand these markets. Yesterday, the benchmark closed up a whisker, 0.02% higher. Inside that pipsqueak of a fraction reveals a world of investors’ hopes and fears.

Healthcare and IT took off yesterday while utilities, financials and energy sunk. Again. Bloomberg’s Jonathan Ferro captured the disconnect in this Tweet just after the market closed.

The S&P is so weighted to the big 5 tech stocks—everyone together now: Apple, Amazon, Alphabet, Facebook and Microsoft—that the Fab 5 are enough to keep the index above water even on days when the other components sink. The rally in the S&P is as much about a rally in Big Tech as any other factor. The Fed too plays a big role in this bull run.

The S&P 500 is up 31% since its March 23 bottom. Goldman Sachs, for one, is unconvinced the rally is sustainable. With mutual funds underperforming, investors are piling into the big names in the index, it says. “The ‘fear of missing out’ best describes the thought process,” Goldman’s David Kostin writes in the report, according to Bloomberg.

Goldman thinks a correction is in the cards. (The markets fell shortly after the Goldman report came out, but recovered in late trading yesterday). It believes the S&P could sink to 2,400—nearly a 20% drop from yesterday’s close—before rebounding to 3,000 later in the year.

That would be one heck of a “W-shaped” markets rebound. Hold on to your hat.


Have a nice day everyone. I’ll see you here tomorrow.

Bernhard Warner

Looking for more detail on coronavirus? Fortune’s Outbreak newsletter will keep you up to date on the latest news surrounding the coronavirus outbreak and its impact on business and commerce globally. Sign up here.

And, you can write to or reply to this email with suggestions and feedback.

Today's reads

WFH is working. Work-from-home has proven so successful for Nationwide that the privately held insurer will make it a permanent feature for employees after the pandemic passes. CEO Kirt Walker participated in a revealing Q&A with Fortune's Lee Clifford explaining how the company made the transition on the fly—and now it's not looking back.

The big short. We've seen some weird things in the markets recently. One of them is the army of retail investors using their zero-cost trading platforms—think Robinhood and E*Trade—to short the markets. It hasn't gone so well, says Derek Horstmeyer, an associate professor of finance at the George Mason University School of Business. "Many retail investors are losing money hand over fist in volatile and opaque markets they don’t fully understand," he writes, with some eye-popping data to back up his assertions.

In which I start talking about economic growth... and end up at happiness. Fortune's Devin Hance interviewed me for the Fortune Explains video series. The assignment: How far will GDP fall?, the trillion dollar question. I enjoyed our Q&A. The video was mercifully edited down to a few minutes. Take a look.

(Some of these stories require a subscription to access. To enjoy unlimited access, subscribe today. Thank you for supporting our journalism.)

Market candy


International Holdings Co. PJSC is killing it this year. Last year too. It's up more than 2800% over the past year, after climbing an additional 9.2% yesterday on its home exchange in in Abu Dhabi, making it the best performing stock of the year. Beyond its off-the-charts performance, market observers are puzzled by what's the big deal about International Holdings.

Read More

CEO DailyCFO DailyBroadsheetData SheetTerm Sheet