Goldman Sachs told CNBC Friday the recent correction in stocks reveal that investors expect a bigger global slowdown than official data implies.
October was a disastrous month for long-only stock holders as equity markets around the world shed an estimated $5 trillion of market capitalisation. The S&P 500 in the United States fell on 16 of 23 trading days during the month.
Goldman's chief global equity strategist Peter Oppenheimer said that the volume of selling suggested forecasts of a distinct global slowdown.
"If we benchmark the way equities have moved against macro variables, we think they have now overshot the current slowdown and are implying a much further slowdown from here," Oppenheimer told CNBC's Street Signs, before adding that investors have "overshot on the downside."
Goldman illustrated the anomaly in a note last week that showed the MSCI World index slipping below its usual correlation to global manufacturing data.
The J.P.Morgan Global Manufacturing PMI— a composite index produced by J.P.Morgan and IHS Markit — fell to its lowest level in almost two years in October. It should be noted it remains in expansion territory at 52.1. Any figure above 50 indicates growth.