Goldman Sachs is warning clients of a summer correction in the stock market as economic growth slows down and political risks rise. “After a strong rally in equities in 1H we see risk of a setback in the summer due to the combination of weaker growth data, already more dovish central bank expectations and rising policy uncertainty into the US elections,” Christian Mueller-Glissmann, Goldman’s head of asset allocation research, said in a note. The Wall Street firm shifted its rating to neutral across assets on a three-month horizon, including equities, commodities, bonds, cash and credit. To be sure, Goldman remained its overweight rating on equities over the next 12 months. .SPX YTD mountain S & P 500 The strong tech-led rally this year showed signs of broadening out to small-cap shares and cyclical names as investors rotated out of winning megacap names. The S & P 500 is up about 16% year to date, just 2% off its record high. But Goldman doesn’t believe that rotation is enough to keep markets buoyant in the short term. Goldman said it sees increasing risk of a correction. Typically, a correction is defined as a 10% drawdown from a recent high in the S & P 500 and a bear market equals to a 20% pullback. The firm noted it doesn’t see that correction turning into a bear market. “Only when our cycle growth score shifted below zero, which has historically been mostly around recessions, did equities have drawdowns in excess of 20%,” the strategist said. ‘With only some growth slowdown, a healthy private sector and a buffer from central bank easing, equity drawdown risk should be limited.” The rally took a breather Thursday as investors continued to pare positions in high-flying tech while taking profit on recent runs elsewhere. The blue-chip Dow Jones Industrial Average slid more than 500 points in the previous session, breaking a six-day win streak with its worst daily performance since May 23. The S & P 500 is currently off 2% from its recent high.