Goldman Sachs(US:GS) Jin Shi Shu Ju·2025-07-30 13:39Group 1: Stock Valuation - Despite high interest rates, increased uncertainty, and rising geopolitical risks, U.S. stock valuations remain at their highest level since the late 1990s, raising concerns about potential disconnection from fundamentals [3] - Goldman Sachs' investment strategy model indicates that the fundamental drivers can explain most of the current high valuations, but not all, with the predicted price-to-earnings ratio at 20.7 times compared to the actual 22.4 times, while the average since 1990 is 15.9 times [3] - The speculative trading index suggests current risks are elevated, highlighted by the trading of "meme stocks," indicating a particularly high market risk appetite [3] Group 2: Housing Prices - Although the Financial Excess Monitor indicates some risks in housing prices, Goldman Sachs is less concerned as current high prices reflect a persistent supply-demand imbalance in single-family homes rather than loose lending standards or speculative purchases [4] - The shortage of single-family homes may continue for some time, limiting the risk of significant price declines, and loose lending standards are not the primary driver of rising home prices, as the median credit score for mortgage issuance remains slightly above pre-pandemic levels [4] Group 3: Household Debt - Investors are primarily concerned about low savings rates, which may prompt households to reduce consumption and increase savings due to economic uncertainties from the Russia-Ukraine conflict [5] - Goldman Sachs' global investment research model shows that low savings rates align with fundamental drivers, particularly high household wealth [5] - Concerns about rising consumer credit delinquency rates indicating financial fragility are mitigated, as the increase mainly reflects inadvertent risk loans rather than a deterioration in household financial conditions, with delinquency rates stabilizing [5] Group 4: Corporate Debt - Corporate interest expenses have significantly increased in recent years, but the impact appears limited so far [6] - Goldman Sachs estimates that refinancing debt due in the next two years will only increase interest expenses by 3%, down from a previous estimate of 7%, reflecting that much of the debt has been refinanced at higher rates and corporate debt rates have significantly decreased [6] Group 5: Fiscal Sustainability - The greatest medium- to long-term risk for the U.S. may arise if debt and corresponding interest expenses grow large enough, necessitating sustained fiscal surpluses to stabilize the debt-to-GDP ratio, which may be difficult to maintain [7] - It is challenging to predict when the market will become more concerned about this issue, but any resulting upward pressure on interest rates could tighten broader financial conditions, especially given already high asset valuations, potentially hindering economic growth [7]