Goldman Model Predicts Trouble As Grains Get Hit

This is an abridged version of our Daily Report.

Model trouble

A Goldman Sachs model incorporating five fundamental factors shows a high risk of an imminent bear market in stocks.

When the model reaches its current level, the average S&P 500 return over the next six months was negative 6%.

No gains for grains

Combined sentiment toward corn and soybeans has been among the lowest since 1991.

When a 5-day average of the Optimism Index for both contracts was this low, forward returns in the DBIQ Diversified Agriculture Index were decent, especially shorter-term, and soybeans tended to do better than corn.

Defensive

Utilities were the best-performing sector on Wednesday with more than a 1% gain. Tech was the biggest loser, with more than a 1% loss. Since the inception of XLU and XLK, this has happened 64 times, and it was mildly negative for stocks in the short-term.