Goldman’s Flood sees buy the dip returning with S&P 500 at 5,000

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Goldman’s Flood sees buy the dip returning with S&P 500 at 5,000.

trade ideas :: 2025-04-09 :: source - bloomberg

By Michael Msika

(Bloomberg) — The S&P 500 stock index (^GSPC) has dropped to a level where long-term investors are starting to buy the dip, according to Goldman Sachs Group Inc. partner John Flood.

The US stock index is flirting with bear market levels after plunging nearly 19% since its February peak. The benchmark closed below the 5,000 level for the first time in nearly a year on Tuesday after the US administration implemented reciprocal tariffs on trading partners, boosting recession risk.

“From my conversations with longer-duration investors, it feels like they will start scale buying the S&P 500 at 5,000 and get more aggressive in the mid-4,000s,” Flood wrote in a note to clients on Tuesday.

Flood said that looking back at the 12 recessions since World War two ended 80 years ago, the S&P 500’s median price decline from the high mark is 24%. Given the US index topped out at 6,144 on Feb. 19 of this year, “this gets you to S&P 500 around 4,600,” he added.

Vigilantes’ Signal

Market losses are also piling pressure on President Donald Trump to moderate his stance regarding trade barriers, according to Ed Yardeni, the founder of Yardeni Research.

“The Stock and Bond Vigilantes are signaling that the Trump administration may be playing with liquid nitro,” Yardeni wrote in a note to clients. “Something may be about to blow up in the capital markets as a result of the stress created by the administration’s trade war. If so, then the S&P 500 will fall into a bear market for sure.”

Yardeni said a silver lining might come from investor belief that the US Federal Reserve will step in to buoy markets if prices fall sharply. “The ‘Fed Put’ will probably make a quick comeback,” yet markets might not recover unless the US administration moves to quickly negotiate trade deals, he said.

Goldman’s Flood reiterated that in the short-term liquidity in US futures order book is the poorest it’s ever been compared with volume, which will heighten volatility. He warned against price spikes like the intraday surge seen on Tuesday until Trump steps off the gas pedal in his trade war.

“We will get sharp and temporary squeezes in this tape that should be used as selling opportunities until the market believes policy change from this administration is likely,” he said.