Futures are holding steady after all three major averages reached new record highs, buoyed by a momentum trade that continues to elevate sectors such as artificial intelligence, gold, and small-cap stocks. However, market experts suggest that investors should brace for potential volatility in the near future, viewing any pullbacks as viable buying opportunities.
Jean Goldman, the Chief Investment Officer at Cetera Financial Group, highlighted the current market dynamics, emphasizing that the ongoing rally is legitimate. Despite recent successes, Goldman indicated that the market may soon experience fluctuations. With the S&P 500’s price-to-earnings (P/E) ratio around 23—close to the tech bubble level of 25—he underscored the risk posed by high valuations. Additionally, he pointed out that the concentration of the top ten companies in the S&P 500 accounts for approximately 40% of the index, indicating market fragility.
Goldman noted that while the Federal Reserve is expected to implement rate cuts, the extent of these cuts may not be as significant due to varied comments from Fed officials. There’s also the looming impact of tariffs, which could either push inflation onto consumers or squeeze profit margins. Given these factors, he anticipates a market pullback in the range of 3% to 5%. Yet, he reassured investors that these corrections should be approached as ‘buy the dip’ moments, largely because he does not foresee a bear market without an accompanying recession.
Despite potential pressures, the economic indicators remain robust. For instance, the Atlanta Fed’s GDP now estimate sits at 3.4%, and retail sales have exceeded expectations, signaling strong consumer spending and rising productivity. Goldman also highlighted the positive outlook for 2026 earnings, with expectations of around a 13.5% increase for the S&P, which he views as promising.
He additionally pointed out the substantial amount of cash on the sidelines—approximately $26 trillion—awaiting better valuations, which could serve as a driving force for future investment.
In response to the challenge of buying dips in a continually climbing market, Goldman advocated for a diversified portfolio approach as a prudent strategy to mitigate short-term volatility. He mentioned that while waiting for a dip to materialize, his firm is increasing allocations to liquid alternatives and real estate investment trusts (REITs) while maintaining a focus on sectors that have not yet surged alongside large-cap stocks, such as value and mid-cap stocks.
Goldman also expressed optimism regarding the potential for market breadth to expand once the Fed begins to cut rates. He identified opportunities in recovering sectors, particularly in financials and recently upgraded cautious sectors like REITs, which benefit from low interest rates and favorable long-term trends in e-commerce and data centers. Furthermore, he noted the attractive valuations within the healthcare sector, driven by aging demographics, managed care developments, and biotechnology innovations.
Overall, Goldman’s perspective reflects a cautious but optimistic outlook on the market’s trajectory, advocating for strategic investments in a diversified manner to navigate the expected fluctuations ahead.
