Goldman Sachs warns stocks will tumble 18% in the next 3 months — and lays out 6 risks they think investors are ignoring

Ramin Talaie/Corbis/Getty Images

• Goldman Sachs expects the S&P 500 to close the year 2% higher, but not before enduring an 18% plunge over the next three months.
• The stock market's recent leap from late-March lows is best attributed to investors' "fear of missing out," the team of analysts led by David Kostin wrote Friday.
• The S&P 500's lofty valuation faces several near-term threats before economic stabilization in the third-quarter pushes it higher, the firm added.
• Listed below are the six risks Goldman says investors are overlooking. The firm thinks these will be responsible for pushing US stocks lower over the next three months.
• Visit the Business Insider homepage for more stories.

Several factors stand to pull the S&P 500 lower before it rises into year-end, Goldman Sachs analysts said Friday.

The bank sees the benchmark index closing the year at 3,000 — roughly 2% higher than its Friday close of 2,930 — as the coronavirus threat fades and the economy rebounds. Yet Goldman's forecast also reflects an 18% downside to its three-month target, with looming threats dragging the benchmark index to 2,400 by the end of the summer.

"A single catalyst may not spark a pullback, but a number of concerns and risks exist that we believe, and our client discussions confirm, investors are downplaying," a team led by chief US equity strategist David Kostin wrote in a client note.

The stock market's recent surge from late-March lows is best attributed to a "fear of missing out" attitude among investors, and skepticism surrounding the rally's strength remains, Goldman added.

Listed below are the six risks Goldman says investors are overlooking. The firm thinks these will be responsible for pushing US stocks lower over the next three months as they become fully realized.

Read more: A fund manager who's quadrupled his competitors' returns for 15 years breaks down his 3 favorite stocks — and his top 3 contrarian ideas