(Bloomberg) — US equities may need to pull back further before they can mount a durable advance, Goldman Sachs Group Inc.’s trading desk warned, citing fragile sentiment and choppy flows that left the S&P 500 vulnerable after its latest attempt to clear the 7,000 level fizzled.
“The only way up is down from here,” Goldman’s trading desk team including Gail Hafif and Brian Garrett wrote in a note to clients. A broadly supportive macro backdrop has done little to help stocks absorb geopolitical tensions and sharp swings in commodity prices, creating what the bank’s traders called a “painful” near-term path.
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The S&P 500 closed little changed on Monday, bouncing back from a steep early loss, as traders debated the potential market impact from an escalating conflict in the Middle East that triggered a spike in oil prices. Crude surged as a near halt to traffic through the Strait of Hormuz and disruption at a big refinery in Saudi Arabia upended energy markets. Brent futures settled about 6.7% higher, near $78 a barrel, the biggest gain since June.
While the spike in oil prices has rattled investors, historical data shows that the damage may be limited. In 22 instances since 2000 when West Texas Intermediate crude jumped 10% or more in a single session, S&P 500 returns beyond the immediate selloff were often positive, the Goldman traders noted. The index fell an average 0.24% the next day, but one-month returns averaged 1.23%, with a median gain of 3.57%, according to Goldman’s data. Spikes in Brent crude showed similar patterns.
Meanwhile, Goldman’s Dom Wilson sees higher oil weighing on equities and credit in the near term, but argues that only a severe, sustained supply disruption would meaningfully damage global growth.
March Headwinds
Yet seasonality also looks mixed in March, according to the Goldman traders. This month ranks as the fourth-worst month for the S&P 500 going back to 1928, with the first half historically choppy. The stretch from March 1 to March 14 averages just a 30 basis-point gain but performance tends to improve, with the two weeks from March 15 averaging an 80 basis-point advance.
Some other highlights from the Goldman trading desk note:
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Retail investors, who have been consistently buying the dip in US stocks, are showing less exuberance this year compared with 2025 amid persistent volatility in the first two months of 2026.
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Corporate buybacks might have provided some support to US stocks, with last week’s repurchase activity running at roughly 1.7 times the 2025 year-to-date daily average and 1.5 times 2024 levels. But that support is about to fade. The next blackout window, during which corporations pause share repurchases, is expected to begin around March 16 and run through the end of April.
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Companies have announced $317 billion in buybacks year-to-date, the second-most active start on record, just behind 2023, but Goldman cautioned that buybacks alone are unlikely to spark a rally, and their removal could amplify weakness.
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Among positive factors, tax refunds could support consumer spending and sentiment into spring. Roughly a quarter of annual refunds are distributed in March, with about three-quarters delivered by end of April.
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Systematic funds have largely stepped back from US equities, but commodity trading advisers are incrementally turning into buyers, the bank’s models show. Yet this dynamic that could shift sharply depending on how market trends evolve.