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Stock Dip Will Prove a Good Buying Opportunity: Goldman

'Investor anxiety has catalyzed a long-anticipated S&P 500 pullback,' Goldman says. But that usually presages a rebound.

The S&P 500’s 5% slump from Sept. 2 to last Monday probably won’t continue, Goldman Sachs analysts say. Indeed the index already has rebounded 2% from Oct. 4.

“Investor anxiety has catalyzed a long-anticipated S&P 500 pullback, but we believe this dip will prove a good buying opportunity, as 5% pullbacks usually have in the past,” writes the Goldman team headed by David Kostin.

“The 226-trading day stretch between last November and last Thursday ranked as the eighth longest period since 1930 without a 5% S&P 500 pullback.

“Since 1980, an investor buying the S&P 500 down 5% from its 12-month high would have gained a median of 6% during the subsequent three months and enjoyed a positive return in 82% of episodes.”

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Goldman targets 4,700 for the S&P 500 at year-end. That represents a 7% gain from the recent level of 4,381, which was down 0.2% from Friday.

JPMorgan strategists are playing a similar tune. “We finally got some weakness after 330 days of no greater than a 5% pullback, but we don’t expect it to last, and advise to buy into the dip,” they wrote.

Last week, Mike Wilson, chief investment officer at Morgan Stanley, said defensive stocks are the way to go, as economic growth slows down and the Federal Reserve tightens policy.

“Large-cap quality leadership since March is signaling what we believe is about to happen — decelerating growth and tightening financial conditions,” he wrote in a commentary cited by MarketWatch.

Economists forecast GDP growth of 3% to 4% for next year.