The global financial market started complicated and variable in 2025, impacted by the AI boom and "tricky" inflation... which have successively shaken the market.

In the observation of Goldman Sachs S&T trader William Hosbein, in the first one and a half months before 2025, the unexpectedly rising US Treasury yields, the stock market's excessive reliance on capital trends and seasonal factors, the concerns over inflation sustainability, and intensified competition in the AI sector collectively create a challenging picture.

Goldman Sachs observes that:

• The rise in US Treasury yields exceeded market expectations, which not only broke the traditional expectations of a rate cut cycle but also put pressure on stock market valuations and triggered concerns over consumer lending.

• At the same time, the stock market's excessive reliance on capital trends and seasonal factors prevented the capital inflow at the beginning of the year from boosting the market as usual.

• Furthermore, a strong non-farm payroll report (increased by 3.5 standard deviations) and investors' ongoing concerns about potential tariff policies kept market sentiment tense.

• Nevertheless, Goldman Sachs' AI basket (GSTMTAIP) still achieved a 5% increase in January, and major stock indices recorded returns above average.

Regarding the future trend of the US Stocks, Goldman Sachs further pointed out that Wednesday's CPI data once again reminds the market that the view that 'high interest rates will last longer' is not unfounded. Currently, the focus in the US stock market is on the speed of interest rate changes, rather than the absolute level. To drive valuation expansion and recovery of Small Cap stocks, interest rates need to decline significantly. If Large Cap stocks perform poorly and high interest rates continue to drag down Small Cap stocks, it will be difficult for the market to sustain an upward trend.

Continuation and differentiation of the AI boom.

Goldman Sachs stated that although the overall sentiment in the US stock market is cautious, the boom in the AI sector continues, but the trends have become differentiated:

It is noteworthy that large Technology companies such as $Alphabet-A (GOOGL.US)$、$Apple (AAPL.US)$、$Microsoft (MSFT.US)$、 $Tesla (TSLA.US)$、 $Advanced Micro Devices (AMD.US)$After the release of the Earnings Reports, the stock prices have all experienced a decline.

In contrast, the stocks in Goldman Sachs' AI software basket (GSTMTAIS) had an average increase of 4.5%, whereas the stocks in the GSTMTMEG basket had an average decrease of 3%.

This may signal that the AI sector is undergoing a cyclic transformation, with Capital possibly flowing into the next phase of AI applications. A noteworthy phenomenon is that META's stock price has risen for 19 consecutive days, showing market recognition of the company's positioning in the AI field.

"Sticky" inflation.

In January, the core inflation in the USA increased by 0.446% month-on-month, with the annualized growth rate over three months rising from 3.1% to 3.8%, and the annualized growth rate over six months rising from 3.2% to 3.7%. Goldman Sachs traders believe that this data indicates that the inflation issue is not a temporary phenomenon, but may have a certain degree of "stickiness".

Goldman Sachs Forex Research Director Mike Cahill pointed out:

Although the slight over-expectation of inflation data is mainly driven by a few categories, this does not mean there can be any complacency. The inflation data for January is 'real', and the rise in areas such as auto insurance and new fees indicates that the transmission effect of inflation continues, and businesses still have a certain degree of pricing power.

The Chinese market rebounded driven by AI.

Since the beginning of this year, China's ADR has significantly outperformed.$S&P 500 Index (.SPX.US)$The gap between the two has reached the second highest level in history. This is mainly due to the sudden rise of DeepSeek and the recent inflation data showing slight improvement in China.

Capital Trend also reflects this trend. The data shows that, $KraneShares CSI China Internet ETF (KWEB.US)$(The ETF tracking Chinese Technology stocks) has seen an Inflow of 0.101 billion USD this month, expected to achieve the best monthly performance since October of last year. Additionally, last week, the pace of net purchases of Chinese Stocks by hedge funds reached the fastest level in four months.

Goldman Sachs believes that the increase in AI-related news indicates that China is actively demonstrating its strength in the AI field to the world. Goldman Sachs predicts that Chinese companies will emphasize their ambitions, capabilities, and investments in the AI field during their Earnings Reports conference calls.

Editor/ping