Your investment strategy must be able to handle the many political and economic challenges that you will encounter over both the short and long term.
But because of this increased participation by quants, analysts at Goldman Sachs are now cautioning that stock prices are becoming more prone to sudden selloffs. The approaching debt-ceiling deadline and concerns about the stability of the US banks could also be triggers for increased stock-market volatility, according to the team of analysts including Christian Mueller-Glissmann.
The team says that buying options to protect against sudden pressure on prices is a good idea, as these issues could flare up in the next few months.
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“After the equity volatility reset and with event risk into the summer, we like buying option hedges,” the bank’s strategists said in a Tuesday research note. The bank’s team recommends buying equity-put spreads and says that selling volatility on safe-haven assets can reduce the costs of these hedges.
Goldman Sachs is neutral on equity and credit, overweight cash and commodities, and underweight bonds. It forecasts the S&P 500 to trade around the 4000 level in the next three months.