Goldman says recent investment flows suggest limited upside for S&P 500

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However, analysts also note that these flows “have slowed significantly over the past few months,” which may suggest the limited S&P 500 upside.

“The S&P 500 return has been 7% stronger than investment flows over the past two months. Weak recent investment flows suggest a headwind for equities over the coming weeks,” they said in a client note.

Goldman’s multi-year analysis shows that S&P 500 daily returns are positively correlated with flows.

“We believe the expansion or contraction in available assets is the primary driver of flows and equity markets,” analysts added.

Bottom line, Goldman sees an 18% probability the S&P 500 trades down more than 5% over the next month.

“We see puts as more attractive in 95% of the months over the past 27 years,” the analysts concluded.