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Total returns for the Nasdaq (NASDAQ:QQQM) during this year’s first half are up 18%, while the S&P 500 (SP500) has gained 35% since last October’s lows.
In addition, since late April, the U.S. mega cap tech stocks are up 24%.
But Goldman Sachs’ Tony Pasquariello in a markets/macro note said that “my instinct is now would be a good time to tap the brakes.”
He named several risks to the bullish equities’ narrative:
First, the fiscal deficit is now expected to be $1.9T, up $400B from four months ago, and as the U.S. presidential election is taking shape, he said he worries about the vulnerability of long-dated treasuries (TLT), (TLH).
Second, the “continued build-up of exposure” within the trading community.
Third, since April, gains have come from a small set of stocks, and “the history book tells us the risk of a selloff increases as the rally narrows,” he said.
In conclusion, he said that we are in a bull market, “but the probability of a drawdown is rising, so I’d look for places to reduce overall portfolio risk as we navigate the next phase of the political game.”