In their beginning of the year outlook, GSIM offered six supporting factors for the bull market, including economic growth, earnings growth, a shift in inflation volatility and low probability of recession. The authors also presented six unsteadying factors: domestic politics, populism, terrorism, cybersecurity, geopolitical tensions and cryptocurrency mania.

GSIM argues that investors are probably better off focusing on fundamental long-term drivers of equity markets embodied by its supporting factors rather than the risks uncovered in unsteadying factors.

In fact, GSIM has slightly revised its GDP growth expectations in the U.S. upward from 2.6 percent to 2.8 percent, indicating acceleration from 2017's 2.3 percent growth. Expectations for economic growth in China and India were also revised upward, but overall global economic growth expectations remain the same at 3.4 percent.

GDP growth expectations for Brazil and Japan were revised down the most, followed by Russia and the UK. After Japan’s GDP shrank by 0.6 percent in the first quarter, GSIM lowered its 2018 GDP growth forecast from 1.6 percent to 1 percent.

Goldman also expects continued low and stable inflation across most global markets. In the U.S., the impact of wage growth and energy price increases should remain “subdued.” As a result, GSIM still calls for just one more increase in the Federal Funds Rate this year, while most onlookers now expect two more rate hikes.

Volatility has returned -- spiking on Feb. 6 when the VIX hit 50, a level that has been exceeded only 1 percent of the time since the inception of the VIX. After rallying by 8 percent in the first three weeks of the year, the S&P 500 declined by 12 percent between January 26 and February 9. A month later, the market again declined, by 9 percent, after rising 11 percent between dips.

The trade war rhetoric is causing further volatility in certain countires and sectors. Chinese A-shares in the CSI 300 declined by 11.8 percent through July 20, while U.S. auto stocks have underperformed the S&P 500 by 12.5 percent so far this year.

Global political and financial issues are exacerbating volatility, according to GSIM, which points to increasing tensions between the U.S. and China, the rise of populism in Mexico and Italy and a decreasing stability in the Middle East as contributors to market fluctuations.

GSIM’s analysts note that President Donald Trump’s foreign policies, particularly the U.S. trade wars with China and Mexico are increasing uncertainty. Spikes in volatility accompany tariff announcements and implementation.

Simultaneously, investors have moved assets from U.S. equities to bonds, and international and emerging market equities, looking internationally despite geopolitical tensions and declining emerging market equities.