Goldman Sachs(US:GS) Sou Hu Cai Jing·2025-09-11 04:57Group 1: Market Outlook - Goldman Sachs hedge fund chief Tony Pasquariello emphasizes that the current AI-driven tech giants and loose monetary and fiscal policies are the two main pillars supporting the bull market in U.S. stocks [1] - Despite the strong support, record high valuations and a decrease in short-term capital inflows suggest that the market needs to "consolidate" in the short term [1] - Investors are advised to remain patient and not to chase prices at current high levels, while considering low-cost options for hedging in preparation for a potential market rally in Q4 [1] Group 2: Economic Growth and Corporate Earnings - Goldman Sachs predicts that U.S. GDP growth will slow to 1.3% by 2025, significantly lower than recent levels, particularly as the labor market is in a "stalling state" [2] - However, the economy is expected to return to trend growth levels of 1.8% and 2.1% in 2026 and 2027, respectively, supported by a loose financial environment, strong fiscal support, deregulation, and a surge in capital expenditures in the AI sector [3] - The report highlights that despite uncertainties like tariffs, S&P 500 earnings per share (EPS) are projected to grow by 7% in both 2024 and 2025, reaching $262 and $280, respectively [3] Group 3: Corporate Profitability - The strong performance of corporate earnings contrasts sharply with the pessimistic macro narrative, as the "S&P 493" (excluding the seven tech giants) saw a 7% year-over-year profit growth in H1 2025, while the tech giants experienced an impressive 28% growth [4] - This indicates that corporate profitability is a solid foundation supporting the market [4] Group 4: Valuation and Capital Flows - The current price-to-earnings (P/E) ratio of the S&P 500 is at 22 times expected earnings for the next 12 months, placing it in the 96th percentile since 1980, which is described as a "harsh" valuation [6] - The report notes that high valuations serve more as a "roadmap" for future returns rather than a short-term sell signal, as sustained high valuations have not prevented significant market gains in the past three years [6] - There is a warning regarding the weakening technical buying momentum that supported the market during the summer, with systematic trading funds now "fairly saturated" and stock buybacks expected to be limited in the coming months [7] Group 5: Key Variables Impacting the Market - The report identifies three key variables that could significantly impact the market: the Federal Reserve, AI, and the law of large numbers [9] - The Federal Reserve is expected to implement about five rate cuts from now until mid-2026, which historically has been favorable for the S&P 500, suggesting that investors should not go against the Fed, especially without an economic recession [11] - AI continues to be a major swing factor, with ongoing debates about whether the market is in the early stages of a new era or experiencing significant capital misallocation [12] - The report acknowledges the challenges of maintaining high growth rates for large tech stocks, as evidenced by Nvidia's stock performance relative to its earnings expectations [13][14]