6 Reasons Goldman Sachs CEO Has Every Reason to Be Terrified of Stock Market

When the head of major financial institution voices his or her concerns over the market, investors tend to sit up and listen. More often than not the signs have been there all along, but in today's increasing frenetic society it takes a "voice from on high" to catch people's attention.

That's what happened earlier this week when speaking at a conference in Germany, Goldman Sachs CEO Lloyd Blankfein shared that he was "unnerved" by things going on in stock market.

1. "Things have been going up for too long." While there have been modest pullbacks in the market, such as the ones in late 2014 and the second half of 2015, a longer view shows the major averages have moved sharply higher over the last five years. Before factoring in dividends, the S&P 500, a key benchmark of institutional investors, is up more than 70% since September 2012.

2. If we track things back to March 2009, when the market bottomed out during the Great Recession, the timeframe for the current "recovery" has been more than eight years, or more than 100 months. By comparison, the average economic expansion over the 1945-2009 period spanned 58.4 months. In other words, the current expansion is rather long in the tooth and there are signs in the data that remind of us this.

3. Coming into 2017 there was a wave of market euphoria surrounding newly elected President Trump, with high hopes for what he and his team would accomplish. Over the last few months, the administration has issued a number of executive orders, but there has yet to be any progress on tax reform or infrastructure spending.

4. Since Aug. 1, shares of utilities have moved higher while financials and consumer discretionary stocks have fallen. Not a positive sign for market watchers with a focus on breadth.

5. Harvey and Irma. Estimates put the damage for Hurricane Harvey at between $75 billion and $95 billion, and we are only starting to see the impact of Hurricane Irma, a category 5 storm that is believed to be one of the most powerful ever coming out of the Atlantic. Over the next several days, we'll have a far better sense of the severity of Irma-related damage, but odds are the combination of Harvey and Irma will be a disruption to the economy and businesses across a wide variety of industries. While we are likely to see a pickup in economic activity once rebuilding efforts begin.

7. The S&P 500 has gone more than 300 trading days without a pullback of 5% or more, the longest such streak since July 19, 1929.

Source: Bloomberg Pro Terminal

Trader Bozhidar Arabadzhiev

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