Short sellers are primarily concerned that the degree of the slowdown in the U.S. economy may exceed expectations, as well as the concentration risk posed by the dominance of large technology stocks in the market.
According to Zhitong Finance APP, Goldman Sachs' market research shows that as we enter the traditional 'autumn of troubles,' the market sentiment among global institutional investors is evidently divided. The bullish camp continues to chase the rise of AI-driven technology stocks, while the bearish camp is increasingly wary of the economic slowdown and market concentration risks. Amid these divergences, a strong consensus has emerged: regardless of bullish or bearish sentiment, investing in gold has become a common choice for everyone. Meanwhile, interest in the Chinese market remains high, with 62% of respondents planning to maintain or increase their allocations to Chinese stocks.
The main content of the report is as follows:
Bull-Bear Divergence: Coexistence of AI Belief and Growth Concerns
This survey of 804 institutional investors indicates that although overall risk sentiment has improved compared to last month and recession fears have further dissipated, two major camps have formed within the market. The bullish camp remains optimistic about the future performance of U.S. stocks, particularly the 'Magnificent 7,' believing that the AI narrative is far from over. More than half of the respondents indicated that they plan to maintain or increase their bullish positions in the 'Magnificent 7.' However, there is a slight decline in new capital inflows into this trade, indicating some changes beneath the surface of enthusiasm. On the other hand, the bears are very clear about their concerns regarding risks. They mainly worry that the degree of the slowdown in the U.S. economy may exceed expectations, as well as the concentration risk brought by the dominance of large technology stocks in the market. Regarding the latter, investor opinions are also varied; 46% of respondents expect the divergence between large stocks and the rest of the market to intensify, while 38% anticipate a reduction in this divergence.
Gold is king: bullish sentiment reaches record high.
Notably, among various asset classes, gold has become the most undisputed choice. According to the survey report, the ratio of investors optimistic about gold prices to those pessimistic is nearly 8 to 1. This marks the first time gold has emerged as the most favored bullish trade in Goldman Sachs' survey, with its popularity being 'unprecedented,' even surpassing developed market equities. The report analyzes that whether it is the bulls anticipating an upcoming rate cut cycle by the Federal Reserve or the bears concerned about the Fed's independence seeking a safe haven, both view gold as an ideal allocation. Additionally, the demand from central banks and potential private investors has collectively pushed the conviction to go long on gold to new heights.
Chinese market in the spotlight, dollar consensus re-emerges.
The survey also indicated that investor interest in the Chinese market is on the rise. When asked which market would perform better this month between U.S. stocks (S&P 500) and the Chinese stock market (MSCI China), investor opinions were almost evenly split, reflecting a level of interest in the Chinese market comparable to that of U.S. equities. Data shows that as many as 62% of respondents plan to maintain or increase their positions in the Chinese stock market. This reflects an increase in attractiveness following a strong rebound in the market during the summer; however, the report also notes that some recent market dynamics have dampened the enthusiasm of certain investors, raising concerns about potential downside risks. Additionally, the movement of the U.S. dollar has once again become a focal point. Following a brief rebound last month, the consensus on shorting the dollar seems to have regained the upper hand. However, there remains a lack of clear consensus among investors regarding the key factors driving the dollar's performance for the remainder of the year—whether it be interest rate differentials, Federal Reserve policy, or global reserve diversification.
