Stocks are looking more primed for a correction as the new trading year kicks off, according to Goldman Sachs. After an unusually strong two-year surge, Peter Oppenheimer, Goldman’s chief global equity strategist, said there could be a short-term digestion period for stocks before further gains can be made. He noted that the two-year performance from 2023 to 2024 ranks in the 93rd percentile over the past 100 years, underscoring just how far up the market has run. “The powerful rally in equity prices in recent months leaves equities ‘priced for perfection,'” Oppenheimer wrote to clients. “While we expect equity markets to make further progress over the year as a whole — largely driven by earnings — they are increasingly vulnerable to a correction driven either by further rises in bond yields and/or disappointments on growth in economic data or earnings.” .SPX 1Y mountain The S & P 500 over the last year Oppenheimer said stocks have a favorite backdrop overall given that the Federal Reserve is in an interest rate cutting cycle without the economy being in a recessionary period. However, high valuations and unusually high market concentration — in addition to the market’s recent runup — provide Oppenheimer with reason for pause. In other words, “While we remain broadly positive on equities, the risks of near-term disappointment are rising,” Oppenheimer told clients. Within this environment, he said to focus on diversification for improving risk-adjusted returns. Downside protection remains attractive, Oppenheimer said, given there are relatively low levels of volatility at the moment. Some of Oppenheimer’s hypothesis may already be becoming reality. Friday’s slide of more than 1% in the S & P 500 pulled the index into negative territory for 2025. While Goldman is gearing up for a pullback period, Wall Street is broadly optimistic on where the market will go in 2025. The average market strategist surveyed by CNBC Pro predicts the S & P 500 will end the year at 6,643, or 12.2% higher than where the broad index finished Wednesday’s session.