Banks led S&P 500 to all-time high even as analysts expect volatility for the remainder of 2021
Banks led the charge last week by raising the Standard and Poors 500 index to an all-time high. Optimism increased even more than in previous weeks due to weak inflation data that made analysts believe the Federal Reserve was less likely to want to act anytime soon. House prices have risen further, giving consumers even more reason to be optimistic.
Even bitcoin and other cryptocurrencies have started to rise again, leading some investors to question whether digital currency could ultimately be correlated to markets.
Digital currency is now a constant topic on CNBC, signaling even more evidence that it’s here to stay. But easing inflation concerns was the main catalyst for the market’s recovery last week, even as the United States recovers from the pandemic.
However, as stock indices hit new highs, Goldman Sachs warned of a possible pullback that could impact bank valuations and overall stock markets. The reasoning came from options data. A Goldman Sachs strategist said: “Strong asymmetry reflects investors’ perception that high volatility would return if the markets were to sell off. ”
In other words, if the bears start to prevail, the market could face volatility and a sell off. As the Banking Exchange reported last week, Goldman Sachs doesn’t seem to be saying it’s inevitable, as the language is light and further indicates the possibility that if there were a market correction it would be widespread and therefore affect all major investment category.
The market is expected to be more sensitive to economic data and earnings reports than in the first six months of 2021. Day traders could be the big winners in the second half of the year. Reuters highlighted the Cboe volatility index by considering the potential for volatility as it finished down 2.2 points last week, the lowest in more than a year.
Nonetheless, as predictions of market volatility become increasingly common, analysts remain optimistic about the overall economy.