Goldman Sachs Warns of Elevated Drawdown Risks for S&P 500

According to a recent report from Goldman Sachs, the stock market's hot streak may soon come to an abrupt end. The bank's equity asymmetry framework, which assesses stocks based on the market environment and economic data, is signaling an elevated risk of a market downturn.

As of August 15, 2025, 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. This spike in drawdown risks is similar to the one seen earlier in the year, which preceded the market sell-off triggered by President Trump's tariff announcements.

Goldman Sachs cites two key reasons for the increased risk. Firstly, there are signs of "worsening business cycle momentum" and recent weakness in the job market, with the U.S. adding fewer jobs than expected in recent months. Secondly, the bank expects inflation to pick up in the second half of the year as the effects of tariffs continue to work their way through the economy. This could prompt the Federal Reserve to ease monetary policy, but the move could also come with more equity volatility if it fails to meet already dovish expectations.

Wall Street forecasters have been on high alert for signals of a coming correction as major indexes hover near all-time highs. Goldman Sachs' latest warning suggests that the market's hot streak may be nearing its end.