Goldman Traders Warn S&P 500 Faces Painful Pullback Before Rebound

Goldman Sachs’ trading desk told clients that U.S. equities are likely to weaken before mounting a sustained advance after the S&P 500’s latest attempt to clear the 7,000 level “fizzled.” The desk’s note, authored by a team that includes Gail Hafif and Brian Garrett, concluded bluntly that “The only way up is down from here.”

Hafif and Garrett’s team pointed to fragile sentiment and choppy flows as the immediate drivers of vulnerability in stocks, saying a broadly supportive macro backdrop has done little to help markets absorb geopolitical tensions and sharp swings in commodity prices, creating what the trading team called a “painful” near-term path. The note frames the outlook as a sequence in which markets first correct before building momentum for a durable rebound.

The desk flagged corporate buybacks and consumer cash as offsetting factors but warned they are not cures. Companies have announced $317 billion in buybacks year-to-date, the team noted, calling that the second-most active start on record, just behind 2023, and adding that buybacks alone are unlikely to spark a rally. The note also cautioned that the removal of buybacks could amplify weakness. On the consumer side, the team highlighted tax refunds as a support: roughly a quarter of annual refunds are distributed in March, with about three-quarters delivered by end of April.

Goldman’s models show a mixed set of market participants amplifying the uncertainty. Systematic funds have largely stepped back from U.S. equities, while commodity trading advisers are incrementally turning into buyers, the models show. The trading desk warned that this flow dynamic could shift sharply depending on how market trends evolve, meaning a short-lived CTA bid could evaporate if systematics re-enter or if trend signals reverse.

In a parallel rendering of the note, the trading team led by Gail Hafif and Brian Garrett wrote: “From here, the only way up is to first adjust downward and then build momentum for an upward move.” Some market participants framed the likely arc as a shakeout or pullback-style correction, an eventual attempt to re-clear the 7,000-point threshold, and only then the start of a new, more durable bull market.

For traders and portfolio managers inside Goldman and on the desk, the implication is tactical: watch buyback announcements and tax-refund flow into consumption, monitor CTA positioning and systematic re-entry signals, and prepare for volatility that could make short-term P&L noisy even as the macro backdrop remains broadly supportive. The trading desk’s advice is clear: expect pain before a potential rebound.