Goldman Sachs Bull-Bear Indicator Predicts Shock Drop for Stocks

When it comes to technical trading and reading the market, no other indicator has the stunning success rate of the Goldman Sachs Bull-Bear Indicator. A combination of historical comparisons of six different metrics, the Goldman Sachs Bull-Bear Indicator has accurately predicted 100% of bear markets since 1957. That’s a pretty solid track record. And right now it’s flashing a warning signal that’s preceded every bear market the indicator’s predicted. If it’s right again, that means there’s a 100% chance we’re going to see a bear market that shocks investors coming our way. But we may have a little more time to prepare than a lot of financial pundits say…

Goldman Sachs Bull-Bear Indicator: A Brief History

Before we get into what the Goldman Sachs Bull-Bear Indicator is saying and how long you have to prepare for the impending bear market, we need to cover what this indicator actually is and why it’s so important that we pay attention…

The Goldman Sachs Bull-Bear Indicator is a combination of several financial metrics into one signal. You see, after decades of research, Goldman has found that there are six key factors that precede a bear market for stocks. When high stock valuations, a flat yield curve, strong manufacturing activity, private sector overspending, rising inflation, and low unemployment rates all team up, a bear market in stocks usually follows. So, in order to put these metrics into a quantifiable perspective, Goldman ranks each one’s current state against its historical performance and then combines all six results into the Goldman Sachs Bull-Bear Indicator.

And I’ll admit, it’s a little tough to understand all the calculations that go into it, even for someone with a math degree and financial background like me. But one thing that’s easy to understand about the Goldman Sachs Bull-Bear Indicator is that it’s been accurate at predicting every single bear market since 1957. Literally every time the indicator has risen above a 70% reading, a bear market has followed that took at least 20% off the peak value of the S&P 500…

And it’s important that we pay attention because right now, the Goldman Sachs Bull-Bear Indicator is flashing a warning signal as it crosses that critical 70% threshold. It says a major shock is coming to the stock market. And investors would be better served to prepare than to wait and try to react.

What’s Leading the Goldman Sachs Bull-Bear Indicator?

Currently, the biggest contributors to the high score we’re getting in the indicator are stock valuations in the 95th percentile (or the highest 5% in history), incredibly low unemployment (conversely, the lowest 5% in history), and the extreme inversion of the yield curve that’s only spent 16% of its history more upside-down than it is now. And while private-sector spending and rising inflation aren’t hitting extremes anymore, they’re not helping lower the Goldman Sachs Bull-Bear Indicator, either. Literally the only bright spot is that manufacturing is already incredibly weak. But that’s something that often precedes a recession!

How Long Until Doomsday?

Now, with the Goldman Sachs Bull-Bear Indicator warning of impending doom, the logical question is: How long do we have until the stuff hits the fan? Well, that’s the one bright spot in this coverage. Because we might have a lot longer than many experts believe we have. And that’s because sometimes, when the conditions are just right, an “anomalous bull market” continues for a few years after the Goldman Sachs Bull-Bear Indicator hits 70%. I’ll bring back my chart of the indicator from earlier so you can easily see what I’m talking about…

In the chart, the Goldman Sachs Bull-Bear Indicator was hovering above 70% for several years before the market crashed when the dot-com bubble broke. It also hovered over 70% for a while preceding the bear markets of 1990 and the GFC in 2008. The amount of time is different in all three situations, but the tailwinds that led to those “anomalous bulls” were similar. And they’re coming together again as we speak. Global financial regulators are loosening monetary policy and lowering interest rates. And that is allowing money supply to grow again. It’s also reducing the risk of investment for companies by lowering the cost of borrowed money. That often drives strong bull markets. So while the Goldman Sachs Bull-Bear Indicator is always right, this could be one of those times where it’s right several years before anything bad happens.

The Bottom Line

The bottom line about the Goldman Sachs Bull-Bear Indicator and any other market-timing device is that even the most accurate aren’t the most well-timed. There are always other factors to take into consideration. In this case, it’s the explosive growth of the artificial intelligence market, which is akin to the birth of personal computers and the advent of the internet. It’s also the Federal Reserve and other global banks getting more dovish by the day. Many have already started lowering rates. The rest are very likely to follow. Money will flow more freely. And the Goldman Sachs Bull-Bear Indicator might have to wait a few years to be proven correct.

So now you know what the Goldman Sachs Bull-Bear Indicator is and how to interpret it. And you also know that even though it’s been right about every bear market since 1957, sometimes it takes a while for the market to agree with the indicator. This really looks like one of those times. But we’ll be keeping an eye on the markets, the Fed, the money supply, and the Goldman Sachs Bull-Bear Indicator. And if anything changes, we’ll be talking about it here, in the pages of Wealth Daily, and also on our YouTube channel and app.

To your wealth,

Jason Williams

@TheReal_JayDubs

Angel Research on Youtube

After graduating Cum Laude in finance and economics, Jason designed and analyzed complex projects for the U.S. Army. He made the jump to the private sector as an investment banking analyst at Morgan Stanley, where he eventually led his own team responsible for billions of dollars in daily trading. Jason left Wall Street to found his own investment office and now shares the strategies he used and the network he built with you. Jason is the founder of Main Street Ventures, a pre-IPO investment newsletter; the founder of Future Giants, a nano cap investing service; and authors The Wealth Advisory income stock newsletter. He is also the managing editor of Wealth Daily. To learn more about Jason, click here.

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