Goldman Sachs says this ‘Goldilocks’ stock market could be in for a shock before the end of the year

Core Viewpoint - The stock market is currently buoyed by optimism surrounding AI and technology companies, with expectations of further monetary easing from the U.S. Federal Reserve [1][4]. Market Performance - The S&P 500 index closed up 0.59%, nearing its all-time high, with S&P futures up 0.53% prior to market opening, indicating positive investor sentiment [3][6]. - Other global indices showed mixed performance, with the STOXX Europe 600 up 0.23%, the U.K.'s FTSE 100 up 0.58%, Japan's Nikkei 225 down 0.69%, China's CSI 300 up 1.54%, and South Korea's KOSPI up 1.33% [6]. Economic Outlook - The concept of a "Goldilocks economy" suggests a balanced economic environment, but there are concerns about potential shocks that could disrupt this balance [2][5]. - Goldman Sachs identifies three potential risks: a growth shock due to rising unemployment or AI disappointments, a rate shock if the Fed does not implement further rate cuts, and a dollar bear scenario where the U.S. dollar loses 10% of its value, impacting foreign investment in U.S. stocks [5][6]. Expert Opinions - Cleveland Fed President Beth Hammack expressed that she does not foresee a significant market drawback in the near term [4]. - A comparison of the current S&P 500 with the late 1990s suggests that while similarities exist, there may still be room for the current market rally to continue [4].