A worse-than-expected earnings season especially for banks and Apple will cause the S&P 500 to pull back 5 to 10 percent from its current all time high, Goldman Sachs warns.
"The current U.S. earnings recession will not end in 2Q [second quarter]," Goldman's market strategist David Kostin wrote in a note to clients over the weekend, explaining that factors like "rising political uncertainty, unstable global growth prospects, and decelerating buybacks" will add to the risk.
The cautious outlook came just before the S&P 500 moved into intraday record-high territory Monday morning, up more than 7 percent from the benchmark's post-Brexit low.
This earnings season will be marked by negative EPS growth for a seventh quarter and could put a lid on the recent gains, Kostin said.
"Bottom-up consensus estimates suggest that S&P 500 adjusted EPS will fall by 3 percent year/year in 2Q 2016," Kostin said. "We expect that growth using operating EPS, S&P's preferred metric, will also be negative, marking the seventh consecutive quarter with negative EPS growth. This has never happened [since 1967] outside of an economic recession."
Here are the main catalysts that could make or break this earnings season, according to Goldman Sachs.