A stock market correction is approaching the level of near certainty as Wall Street faces a major paradigm shift in how to achieve price gains, according to a Goldman Sachs analysis.
In a market outlook that garnered significant attention from traders Monday, the firm's strategists called the valuation "lofty by almost any measure" and attached a 67 percent probability to the chance that the market would fall by 10 percent or more, which is the technical yardstick for a correction.
The call comes amid an increasingly bifurcated times for market prognosticators.
Few if any expect the market to trade lower from current levels, but some, like Deutsche Bank's David Bianco and Jim Paulsen at Wells Capital Management, think upside gains will be limited due to volatility and the likelihood that the market will retreat following 2013's 29 percent gain.
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"We believe S&P 500 currently trades close to fair value and the forward path of the market will depend on the trajectory of profits rather than further expansion of the forward (price-to-earnings) multiple from the current 15.9 (times)," Goldman strategists said. "We forecast a modest price gain of roughly 3 percent to our year-end 2014 target of 1900."
The bullish news is that the firm sees the market index surging to 2,100 by the end of 2014 and then 2,200 by end of 2016, which would make a 20 percent gain in a three-year period.
Between here and there, though, investors will have to cope with a market that is stretched in terms of valuation and companies that will have a harder time improving their bottom line by cutting costs.
"We believe S&P 500 trades close to fair value and the forward path will depend on profit growth rather than P/E expansion," Goldman said.
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The firm further explores the expectation that the market multiple can continue to expand.
To do so, Goldman said, would be to tempt history. The only times since 1976 that the S&P 500 has traded above 17 times earnings was during the tech bubble of the late 1990s and a four-month stint from 2003-04.
"Other than those two episodes, the U.S. stock market has never traded at a P/E of 17 or above," Goldman said. Multiple expansion is further improbable, the note said, because it would have to defy rising inflation and bond yields, which usually don't accompany rising P/E levels.
—By CNBC's Jeff Cox. Follow him on Twitter @JeffCoxCNBCcom.