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Goldman Sachs is waving a red flag for global equities as the S&P 500 (SPY) edges closer to a full-blown correction, now down more than 9% from its February high. Analysts warn that if the selloff extends beyond 10%and if U.S. growth concerns, not just tech-driven volatility, are fueling the declinemarkets worldwide could take a hit. Looking at past corrections since 1990, Goldman found that global indexes have typically tumbled anywhere from 16% to 21% in response to deep S&P 500 drawdowns. While investors might hope for a different outcome this time, history suggests otherwise.
But not all markets are feeling the same pressure. The STOXX Europe 600 is still holding a 5.8% gain for the year, while Hong Kong's Hang Seng Index has surged 17%. Goldman's Peter Oppenheimer sees a case for Europe and other international markets to outperform the U.S. if their economies hold up better. But there's a catchthose "cheap" valuations outside the U.S. may not be as attractive as they seem. While they trade at a discount compared to U.S. stocks, they're not necessarily cheap by their own historical measures, meaning investors banking on a valuation cushion might need to rethink their strategy.
For those looking to hedge against further downside, international ETFs offer a way to diversify beyond U.S. markets. However, the question remains: will these markets continue to show strength, or is another synchronized selloff on the horizon? With trade tensions, recession fears, and tightening financial conditions all in play, investors should brace for turbulence.
This article first appeared on GuruFocus.