• The stock market's risk of a correction has risen, Goldman Sachs says.

• The bank said a particular market gauge is flashing an elevated risk of an S&P 500 drawdown.

• That's because market volatility remains low, but the economy will likely face more tariff headwinds.

The stock market's hot streak might soon come to an abrupt end, Goldman Sachs said.

In a note to clients, the bank said that its equity asymmetry framework — one of its gauges that assesses stocks based on the market environment and the latest economic data — was sending a signal that the risk for a coming stock market drop had increased.

According to its model, the S&P 500 now faces a higher than 10% chance of a drawdown within the next three months, and more than a 20% chance of a drawdown in the next 12 months, analysts said.

The spike in drawdown risks looks similar to the spike seen during the S&P 500's run-up at the start of the year, the bank said. Goldman's equity asymmetry framework flagged an elevated risk of a drawdown before President Donald Trump announced his slate of tariffs on April 2, which sparked a historic sell-off.

"The equity drawdown probability is elevated and has increased recently. Usually levels above 30% give a signal for downside risk to equities, and current levels are nearing those," analysts said.

The bank said there were two reasons its model was flashing an elevated risk of a decline:

• Volatility in the market is low. The VIX has dropped 71% from its peak on Liberation Day.

• The economy is slowing. In order for stocks to do well in a low-volatility environment, the momentum of the economy needs to remain strong. But that looks unlikely, given looming risks stemming from tariffs, the bank said.

Analysts pointed to "worsening business cycle momentum" and recent weakness in the job market, with the US adding fewer jobs than expected in recent months.

The bank also thinks inflation is likely to pick up in the second half of the year as Trump's tariffs continue to work their way through the economy. David Mericle, the chief US economist at the bank, told CNBC on Wednesday that he expected inflation to drift over 3% as the effects of tariffs begin to materialize.

"This is likely to trigger more Fed easing but it could come with more equity volatility in the event of growth concerns, especially if Fed easing disappoints already dovish expectations," analysts said.

Wall Street forecasters have been on high alert for signals of a coming correction as major indexes hover near all-time highs.

The S&P 500 is up 10% year-to-date and 29% since its post-Liberation Day low.

Read the original article on Business Insider

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• 

  A slow-motion car crash is unfolding across Britain’s housing market

  Tim Wallace Sat 16 August 2025 at 7:00 am BST 7 min read

  

  Britain’s homeowners are heading towards a cliff edge.

  Despite interest rates falling over the past 12 months, millions of heavily indebted households are preparing to come off cheap fixed-rate loans taken out when borrowing costs were at rock-bottom.

  At the same time, the housing market is at a low ebb, battered by a surge in stamp duty rates that has deterred buyers and helped drive down prices.

  This means that many homeowners are now being confronted with an uncomfortable reality that their flats and houses, which appeared good investments at the time, are worth much less than they had hoped.

  Advising sellers on what to do before their mortgage repayments jump has become a careful game of strategy for Howard Davis, of Howard Independent Estate Agents.

  For example, one of his clients has been trying to sell a two-bedroom flat in the leafy suburb of Clifton, Bristol, ahead of a painful remortgaging process in November.

  However, so far, they are struggling to do a deal for anything above the price paid for the property three years ago.

  “We’ve reduced the price and managed to get six people around to look at it on Monday,” says Davis.

  “Half of them said they quite like it, but they’re frightened to commit because they’re seeing other prices falling all the time.

  “We were expecting, by Tuesday, to have several offers at a dramatically reduced price. And today, we haven’t. So we may have to slice that price again.

  “The guy’s probably going to come out even from a property he bought three years ago, because he’s frightened his interest rate is just going to hike up on his mortgage deal in November.”

  Fresh housing crunch

  The same is true across much of the South of England.

  House prices have dipped from March’s peak, when the market was boosted by buyers rushing to beat the rise in stamp duty.

  However, more serious may be the market’s failure in many parts of the country to rise at all since Liz Truss’s mini-Budget of 2022, which led to a sharp drop in sales.

  Prices in London, the South East, the South West and the East of England are all still below their peaks almost three years ago.

  Across the UK as a whole, prices are up just 1.1pc over that timeframe.

  Worryingly, the long-held British belief that investment in property is a one-way bet is being shattered.

  According to Trevor Brown, a surveyor in Southend, Essex, owners can only sell if they accept the reality that their home is not worth as much as they hoped.

  “There are fewer potential buyers, borrowing is still very expensive and stamp duty is levied on every sale that we see,” he says. “It makes buying expensive.

  “The first-time buyer market is out of the equation unless you have mum and dad ready to contribute considerably. And nobody is buying buy-to-lets any more at all.”

  Concerns over the property market have been fuelled by a recent exodus of landlords, triggered by a barrage of tax rises under the Conservatives and the introduction of Labour’s renters’ rights bill, which aims to strengthen the power of tenants.

  “Auctions are full of tenanted properties, where landlords are getting out of the marketplace,” says Brown.

  All of which is teeing up what some see as a fresh housing crunch, threatening to undermine confidence in the wider economy and curbing much-needed tax revenues.

  However, the market has not yet completely stalled.

  Banks and building societies approved 188,000 mortgages in the three months to June.

  That is down from the 200,000 in the quarter before the stamp duty holiday ended on March 31, but is above the low of 135,000 in early 2023 in the wake of Truss’s mini-Budget.

  But this rebound is far short of making up for lost sales in recent years, while mortgages are still running below levels seen before the pandemic.

  Worse still, pessimism on prices has crashed to its worst level in a year, according to the latest report from the Royal Institution of Chartered Surveyors, which regularly questions its members on the state of the market.

  Even though the Bank of England has cut its headline interest rate from 5.25pc to 4pc over the past 12 months, the average rate paid on mortgages is still rising.

  That is because the cheap loans which millions of families locked into before the cost of living crisis are now coming to an end. Those borrowers often bought with a mortgage rate of less than 2pc, but must now refinance with repayments north of 4pc.

  The average rate paid on the nation’s mortgages is up from 2.1pc at the end of 2021 to 3.9pc today, with the Bank predicting that it will keep rising to 4.1pc into 2026.

  Before the pandemic, the average mortgage payment was less than £700, according to direct debit data from the Office for National Statistics and Vocalink. Now it is just shy of £1,000.

  Bank officials estimate that 3.6 million households will remortgage onto higher rates over the next three years, while only 2.5 million will see their rate fall. It means an average increase in repayments of £107 per month in the coming years.

  Tightening belts

  Compounding the problem is a renewed rise in living costs.

  David Hickman, a surveyor in Devon, says that Rachel Reeves’s National Insurance tax raid has hammered the local jobs market, undermining confidence among buyers.

  “There’s this job insecurity going around, and that’s making people sit tight and not move unless they have to,” he says.

  A weaker housing market, in turn, becomes a danger to both the economy and the public finances.

  “When asset prices rise, it gives people confidence to go out and spend,” says Sam Miley, at the Centre for Economics and Business Research. “And when prices are falling, it encourages people to be a bit more cautious.

  “At the moment, it is an environment of slower house price growth, so that plays out in a slower rate of consumption growth.”

  Such concerns will not go unnoticed for those in the Government, particularly as the Chancellor prepares to plug a black hole worth as much as £50bn.

  The Office for Budget Responsibility predicts that Labour’s pledge to build more homes will trigger more property sales, which in turn will help the Treasury bring in more stamp duty for each sale.

  The watchdog anticipates annual revenues from stamp duty and other transaction taxes will rise from £13.5bn last year to £24.5bn by the end of the decade.

  But dwindling house prices will serve as a threat to that, fuelled by a recent drop-off in construction activity.

  Housing starts have barely budged and planning approvals have fallen to a record low since the Government unveiled its pledge to build 1.5m homes by 2030.

  Any shortfall in property transactions could prove critical for Reeves, says Andrew Wishart, economist at Berenberg Bank.

  “It is a relatively small tax but when the Chancellor is working with headroom of 0.2 or 0.3pc of GDP, any small tax could make the difference,” says Wishart.

  “The forecast looks optimistic – when looking at housing construction volumes, they are a long, long way off the target.”

  However, support for the market might be on the way.

  Not only is the Bank of England expected to cut interest rates a little further in the coming months, but looser mortgage lending rules should also make life a little easier for first-time buyers.

  Yet regardless of that, many believe it will remain a buyer’s market, including Jeremy Leaf, an estate agent in north London.

  “There is a hell of a lot of property on the market, and if you want to stand out, you have to be realistic about price,” he says.

  “A lady came in wanting to look at one of our properties. She said, ‘It is very nice. But I have got 12 to see today.’”