Goldman Sachs senior strategist warns stocks could see 'considerable' pre-election downside that isn't being factored into models
- Goldman Sachs' Abby Joseph Cohen told Bloomberg on Thursday that markets could see "considerable downside" before the election due to factors that financial models aren't picking up.
- These factors include the outcome of the election and what Congress and the president will do next before election day, Cohen said.
- The senior investment strategist added that the market is vulnerable to volatility and disappointment given the"wide gaps" in the relative valuation of stocks.
Goldman Sachs' Abby Joseph Cohen told Bloomberg on Thursday that markets could soon see "considerable downside" based on factors that financial models cannot predict.
What Congress will do next, what the president will say, and how the election will end cannot be forecasted by modeling, the senior investment strategist said.
"Those of us who have lived our professional lives really focusing in on the math, I think should feel very humble right now," Cohen said. "Because what we recognize is that the models may not be able to properly reflect all of the volatility not just in the markets, but in the economy, in policy, and of course in investor sentiment."
While Cohen said that it's not unusual for volatility to rise before an election, there's also been "erratic movement" with regard to fiscal policy. Stocks quickly sold off on Tuesday after Trump tweeted that negotiations for the next stimulus plan would be halted until the election.
The famed strategist also said there are "wide gaps" in the relative valuation of stocks. Just a handful of stocks drove the market's record rally following its March lows. Cohen said this can make the market more volatile, and more vulnerable to disappointments.