Eurozone debt crisis could spark bear market in US, Goldman Sachs warns

Monday, June 4, 2012
By Paul Martin

An escalation of the financial crisis in Spain or elsewhere in the eurozone could fuel a bear market in the US, Goldman Sachs warned.

By Angela Monaghan
04 Jun 2012

A report said that although it was most likely that an election on June 17 would result in Greece remaining in the single currency, “financial contagion or crisis in Spain” could prompt a bear market.

Outlining mid-year forecasts, David Kostin, chief US equity strategist, said that should the crisis in the region worsen, the S&P 500 index could fall to 1,125. That would represent a 21pc loss compared with its 2012 closing peak of 1,419.04.

Mr Kostin said there were three key events in the short-term that could heighten investor uncertainty: the Greek election on June 17; the June meeting of the Federal Open Market Committee; and the US Supreme Court’s ruling on healthcare reform.

He gave a central mid-year forecast for the S&P 500 of 1,325, should there be no intensification of the eurozone crisis.

On Monday the index was down 0.8pc at 1,268 following an unexpected drop in new factory orders in the US, and a grim survey on business activity in New York. The Dow Jones Industrial Average was also down, by 0.5pc at 12,054. British markets were closed but most European markets were open.

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