After nearly 10 years of generating above average returns, investors are being hard hit with a series of sell-offs in 2018, dragging on stocks across industries and weighing the most heavily on once high-flying tech plays such as Amazon.com Inc. (AMZN), down 20% from recent highs. 

Now, analysts at Goldman Sachs are forecasting more pain ahead, pointing to the investment bank's bear market indicator that is "flashing red" at its highest levels in five decades. The bear market prediction tool, which takes into account various factors such as unemployment rate, manufacturing data, core inflation, the term structure of the yield curve, and stock valuation based on the Shiller PE ratio, is at a rare 73%, as reported by CNBC

Goldman's Bear Market Warning Signs 

Bear market indicator is at 73%, its highest since the late 1960s—early 1970s.
The tool predicts a 0% average return over the next 12 months, "substantial" risk of a down draft.
Gauge is "flashing red." 

Correction More Likely Followed by Bear Market

"Historically, when the Indicator rises above 60% it is a good signal to investors to turn cautious, or at the very least recognize that a correction followed by a rally is more likely to be followed by a bear market than when these indicators are low," wrote Goldman's chief global equity strategist Peter Oppenheimer. 

The strategist pointed to downside drivers including tightening monetary policy, heightened U.S. trade tensions and rising oil prices, which he says have all slowed global growth momentum. 

"We often see slightly higher volatility and a peak followed by a correction, and then another peak around the top of a bull market. We have seen corrections twice this year: in January and then again in October," wrote Oppenheimer. 

It is a good signal to investors to turn cautious, or at the very least recognize that a correction followed by a rally is more likely to be followed by a bear market ...." —Goldman Sachs.

Goldman Expects Period of Low Returns

Despite the flashing red lights, the Goldman analyst views a prolonged period of low returns as more likely than a sustained bear market, and does not forecast a recession. A recession would more likely be following by a sharp rise in interest rates and inflation, which has been lethargic, as well as GDP growth below 1%, according to Oppenheimer. 

Nonetheless, even market bulls such as Federated Investors' Steve Chiavarone, who predicted the October sell-off, see trouble ahead. With the markets breaking below their 200-day moving averages in October, Chiavarone sees stocks in a weaker position to handle uncertainty generated by a number of upcoming events, including President Donald Trump's meeting with China's Xi Jinping on Dec. 1 and the next Federal Reserve meeting. 

"We ultimately think markets are going to move higher into the back end of the year," he said Friday on CNBC's Trading Nation. "But because we broke below those key technical levels, there is some risk of more downside, and we're watchful of that."

Even Goldman's best case scenario of 0% returns without a bear market is very sobering. The increasingly downbeat sentiment on the Street, driven by mounting market headwinds, should lead investors to diversify into other kinds of securities. The bull market party, as we know it, is over.